Gender pay gaps in domestic and foreign-owned firms
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Gender pay gaps in domestic and foreign-owned firms Iga Magda1
· Katarzyna Sałach2
Received: 1 July 2019 / Accepted: 19 September 2020 © The Author(s) 2020
Abstract We investigate differences in gender wage gaps between foreign-owned and domestically owned firms in Poland, a country that has experienced large FDI inflows over the past three decades. We show that the adjusted gender wage gaps are larger among employees working in the foreign-owned sector than in the domestic sector. The gender pay gaps are found to be larger in the foreign-owned companies than in the domestically owned firms at every decile of the wage distribution, with the largest disparities being observed at the bottom and at the top. Our findings also show that in the foreignowned sector, the returns to individual, job, and firm characteristics earned by women are much lower than the returns earned by men, but that the foreign-owned firms appear to pay higher firm-specific wage premia to women than to men, thereby narrowing within-firm gender wage inequality. These patterns differ from those observed in the domestic sector, in which firm wage premia tend to widen within-firm wage distributions, and contribute to the overall level of gender wage inequality. Keywords Gender wage gaps · Foreign ownership · Wage decomposition · FDI · Quantile regression
1 Introduction A number of studies have shown that, contrary to most theoretical predictions, the gender wage gap tends to be larger in foreign-owned companies than in domestically owned firms. This larger gender wage gap is found both when the raw differences in the average wages of men and women are measured, and when the pay gap is adjusted by taking into account differences in observable individual, job, and firm characteristics.
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Iga Magda [email protected] Katarzyna Sałach [email protected]
1
SGH Warsaw School of Economics, Institute for Structural Research (IBS), IZA, Warsaw, Poland
2
University of Warsaw, Faculty of Economic Sciences, Warsaw, Poland
123
I. Magda, K. Sałach
So far, however, neither theoretical nor empirical research has provided a convincing explanation for why women are more disadvantaged in terms of pay if the company they work for is owned by foreign investors. Our study has two main goals. First, using different methodological approaches to calculating gender pay gaps, we aim to determine whether these gaps are indeed larger in foreign-owned firms than in domestically owned firms, and whether this pattern holds both for low- and high-wage earners. Second, we seek to shed light on the factors that could explain the differences in the size of the gender pay gap depending on firm ownership. In particular, we are interested in learning whether firm-level wage policies differ between domestically-owned and foreign-owned firms. Our study focuses on Poland, which, like other Central and East European countries, benefited from large foreign direct investment (FDI) inflows after the economic transition in the early 1990s. As a consequence, foreign-owned firms
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