Smaller Differences in Bigger Cities? Assessing the Regional Dimension of the Gender Wage Gap

Although structural determinants have been emphasized for explaining wage differences between men and women, the role of regional opportunity structures still warrants research. This investigation focuses on the relevance of urban labour markets and agglomeration effects for the spatial variation in the gender wage gap and provides comprehensive insights into the underlying mechanisms by combining sociological, economic, and geographical approaches. It is argued that partnership ties impose severe restrictions on women's labour mobility, confining them to the labour markets of their partners and the local conditions of their residential area. According to labour market theory, women's lower responsiveness to better job offers will translate into lower earnings. However, the size of the wage penalty varies with urban size and will be considerably lower in large labour markets. Empirical evidence is provided using data from the German Socio-economic Panel (1992-2012). Methodologically, the study adds to the literature by estimating hybrid, within- and between-effect wage regressions that also take into account dynamic selection into employment. Results indicate that male-female wage differentials narrow with urban size up to 9 per cent, thereby prompting the increasingly discussed importance of agglomeration effects for women's employment outcomes. Moreover, the study reveals and discusses pitfalls in interpreting results from fixed-effects models.