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Do Firms Respond to Gender Pay Gap Transparency?
Author(s) -
BENNEDSEN MORTEN,
SIMINTZI ELENA,
TSOUTSOURA MARGARITA,
WOLFENZON DANIEL
Publication year - 2022
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.13136
Subject(s) - wage , transparency (behavior) , mandate , labour economics , legislation , productivity , gender pay gap , profitability index , economics , gender gap , demographic economics , business , finance , economic growth , law , political science
We examine the effect of pay transparency on the gender pay gap and firm outcomes. Using a 2006 legislation change in Denmark that requires firms to provide gender‐disaggregated wage statistics, detailed employee‐employer administrative data, and difference‐in‐differences and difference‐in‐discontinuities designs, we find that the law reduces the gender pay gap, primarily by slowing wage growth for male employees. The gender pay gap declines by 2 percentage points, or 13% relative to the prelegislation mean. Despite the reduction of the overall wage bill, the wage transparency mandate does not affect firm profitability, likely because of the offsetting effect of reduced firm productivity.