Gender and Motherhood Wage Gaps in Macedonia
OLS estimates is underestimated, so if selection is considered, this selection leads to an increase of the magnitude of the gap. Furthermore, when analyzing fatherhood premium, motherhood gap and the family gap, one should account for selection since OLS fails to capture the influential reasons of the gap’s existence. Arukampalam et al. (2007) argue that when comparing the raw gender gaps with estimates that control for men’s and women’s attributes, OLS fails to allow for the possibility that characteristics have different returns at different points of the distribution. Buchinsky (1998a) and Guarini (2013) remark that OLS does not efficiently identify the effect of the independent variables on the dependent variable throughout the distribution. OLS is inefficient when the errors are not normally distributed and it fails to make robust estimates of the coefficient vector that would make them insensitive to outliers in the independent variable. When analyzing the gender wage gap in terms of the bargaining power of wages between employees and employers, Card et al. (2013) claim that the estimation problem in OLS models is that the residual components of wages can be correlated with specific patterns of mobility which would lead to biases in the estimated worker- or firm effects. There are three components that could be potentially correlated with the sequence of worker’s wage premiums which would lead to biases in the estimated firm effects. The first component is the deviation of an individual’s alternative wage in certain period from its average value in the sample period. The concern is that there is a presence of a component that is slowly evolving in the alternative wage for a person due to health shocks, learning about unobserved abilities or other random shocks. The second component is the employee share of any transitory fluctuation in the average surplus available at the firm. This slowly evolving component is related to firm’s profitability and it can be correlated with the direction of mobility of workers who move to higher or lower paying firms. The last component is the employee share of the idiosyncratic match effect for individual at a certain firm. This component is a concern in terms of mobility related to matching the worker with the specific job. Manual for Calculation with Applications in Stata
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