Using stochastic frontiers to measure gender wage discrimination. The spanish case

Abstract

This paper investigates how the sex of the employee is decisive as a cause of wage differences. The main contribution lies in the use of a methodology that allows us to determine the maximum earnings a certain worker can obtain once the determinants of individual productivity have been controlled. We would thus be in the presence of wage discrimination due to sex, if the objective characteristic of "being a woman" systematically reduces the maximum wage she could earn. That methodology also enables us to make an approximation of the so-called degree of "wage inefficiency", that is, the gap between the potential wage of a worker and the effective wage earned. In accordance with our results, a woman with a particular human capital, experience and skill could only expect a potential wage 16.48% lower than that of a man with identical characteristics. However, the female wage inefficiency level turns out to be lower than that of males.