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What drives the convergence in male and female wage distributions in Israel? A Shapley decomposition approach

  • Ayal KimhiEmail author
  • Nirit Hanuka-Taflia
Article

Abstract

We examine the drivers of the convergence of the hourly wage distributions of males and females in Israel between 1995 and 2008. Israel is an interesting case study in this respect, since it experienced declining wage inequality in recent decades, as opposed to most developed countries. We found that the gender differences in both average wages and wage inequality declined over time. In particular, average wages increased faster for females than for males, while wage inequality declined faster for males than for females. We decomposed these distributional changes into the contributions of worker and job attributes, the returns on these attributes and residuals using a Shapley approach applied to counterfactual simulated wage distributions. We found that most of the increase in male wages was due to the increase in wages of workers in high-wage occupations and industries, while female wages increased mostly due to the increase in the returns to experience. The decline in wage inequality was driven mostly by changes in attributes, the decline in the returns to education, and the catching-up of immigrant workers, and each of these components was stronger for males than for females. We conclude that the convergence of the male and female wage distributions was due to both changes in the supply of labor, especially among females, and changes in the demand for labor leading to changes in the returns to various skills.

Keywords

Decomposition Inequality Shapley Simulation 

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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Environmental Economics and ManagementHebrew University of JerusalemRehovotIsrael
  2. 2.Shoresh Institution for Socioeconomic ResearchKochav YairIsrael

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