Trading firms and the gender wage gap: evidence from South Africa

Firms engaged in international trade account for a large share of South Africa's output and employment. Therefore, their behaviour has potentially large effects on national outcomes including gender inequality. In this paper, we test whether the gender wage gap (GWG) of trading firms differs from that of domestic firms based on a growing literature that has outlined how the special characteristics of trading firms could lead to such a different GWG. Using a unique employer-employee matched data panel from 2011 to 2016 for South Africa based on novel tax record data and employing various fixed effects regressions, we find that the GWG of trading firms is significantly larger than that of domestic firms. This holds even when controlling for unobserved individual and firm fixed effects that account for factors such as worker education or firm profitability. We also find that firms which both import and export (a crude proxy for foreign-owned firms) behave more equally than other trading firms. This could be driven by foreign owned firms that impose their more equal domestic pay structures on their South African affiliates and would emphasize the role of foreign investment for gender equality.