Does More Mean Less? The Male/Female Wage Gap and the Proportion of Females at the Establishment Level

We examine the theoretical, empirical, and public policy implications of the proportion of females in the establishment. Arrow's model of heterogeneous employer discrimination provides predictions that are tested. Empirical results indicate support for the theory using establishment data, but a contradiction is obtained with the individual data. It is estimated that the proportion of females in the establishment accounts for 26 per cent of the gender log wage gap. Implications for employment equity are considered in the context of a new method of decomposing the log wage gap and indicate that such public policy can reduce this gap by 20 per cent.