Michael Bar

Gender Wage Gap Accounting: The Role of Selection Bias

Mulligan and Rubinstein (2008) (MR) argued that changing selection of working females on unobservable characteristics, from negative in the 1970s to positive in the 1990s, accounted for nearly the entire closing of the gender wage gap. We argue that their female wage equation estimates are inconsistent. Correcting this error substantially weakens the role of the rising selection bias (39 % versus 78 %) and strengthens the contribution of declining discrimination (42 % versus 7 %). Our findings resonate better with related literature. We also explain why our finding of positive selection in the 1970s provides additional support for MR’s main hypothesis that an exogenous rise in the market value of unobservable characteristics contributed to the closing of the gender gap.

Why did Rich Families Increase their Fertility? Inequality and Marketization of Child Care

A negative relationship between income and fertility has persisted for so long that its existence is often taken for granted. One economic theory builds on this relationship and argues that rising inequality leads to greater differential fertility between rich and poor. We show that the relationship between income and fertility has flattened between 1980 and 2010 in the US, a time of increasing inequality, as high income families increased their fertility. These facts challenge the standard theory. We propose that marketization of parental time costs can explain the changing relationship between income and fertility. We show this result both theoretically and quantitatively, after disciplining the model on US data. We explore implications of changing differential fertility for aggregate human capital. Additionally, policies, such as the minimum wage, that affect the cost of marketization, have a negative effect on the fertility and labor supply of high income women. We end by discussing the insights of this theory to the economics of marital sorting.

Threshold-Based Mixed Bundling

This article explores the practice of bundling a free unit of good y (drink) with a threshold purchase of good x (food). Allowing for heterogeneity in consumer drink preferences we characterize the conditions under which the practice is strictly more profitable than linear pricing. An increase in food sales is the source of higher profits. Selection issues reduce profitable opportunities in heterogeneous populations of consumers relative to homogeneous populations. In some cases, an increase in profit from using the practice can be higher when consumers would not otherwise buy the drink. When heterogeneity is further extended to consumer food preferences similar results emerge from numerical calculations. The practice can be Pareto-improving if the seller has limited control over prices.