The effect of the spatial density of firms on gender wage gap

In this paper, we investigate the effect of the spatial density of firms on gender wage gap. We formalize this relationship using a monopsonistic approach in which women face higher travel costs due to domestic responsibilities. This creates not only bargaining power at the firm level but wage discrimination as well. This bargaining power is reduced in dense areas as they typically present a greater number of job opportunities. Utilizing data at municipality level for Chile and a Propensity Score Matching estimator, we find that a higher number of firms in Chilean municipalities is associated with a reduction in the gender wage gap. Depending on the estimator used, the effect of a 10% increase in the number of firms in a municipality is associated with a decrease in the gender wage gap between 0.6 pp. and 0.9 pp.