Gender wage gap and education: a stochastic frontier approach

The purpose of this paper is to get deeper insight into the measurement of gender wage gap. A proper method to identify which part of gender wage differences is due to discrimination against women is provided, and the relationship between wage differences and education is studied.

The stochastic frontier approach is employed to measure wage discrimination against women by using Spanish data from the European Union Statistics on Income and Living Conditions. Mentioned technique allows the authors to split the gender wage gap of workers displaying the same characteristics into two components: the first measures inefficiency in the job search process caused by imperfect information or gender differences concerning preferences regarding working conditions, where as the second takes account of discrimination.

A significant level of discrimination is found in the Spanish labour market at all educational levels, but this problem is quantitatively more important when low-educated workers are studied, and gender discrimination is lower for highly educated women.

In this paper, workers’ potential wage is estimated, and gender discrimination is measured by the gender potential wage gap, since it is not dependent on other wage determinants such as diverse preferences, unmeasured working abilities or imperfect information.