Swimming Upstream, Floating Downstream: Trends in the U.S. and Danish Gender Wage Gaps

While the gender wage gap has reduced considerably in the U.S. since the late 1970s, in Denmark it has virtually stagnated over the same period. Using the U.S. CPS and the Danish Longitudinal Sample data, we compare the development in the gender wage gaps in these two countries between 1983-1995 in both time-series and microeconometric analyses. We present a new decomposition methodology that is anchored on the overall wage distribution and show that the difference in the rates of convergence of the wage gaps in the two countries in this period can be explained by inter-country differences in the wage effects of observed skill prices and gender differences in selectivity. In Denmark, these effects have wiped out any gains arising from women's skill- improvement. In the U.S., these effects have not offset women's wage gains due to skill-improvement. Decompositions at different deciles of the distribution show that women at the highest decile in Denmark have the biggest increase in the wage gap in this period, primarily due to unobservables. In the U.S., the decline in the wage gap is largest at the top and at the middle of the distribution.