Seminar

We analyze whether an increase in the female share of an occupation causally leads to lower relative wages in that occupation. While the literature has documented a negative correlation between the female share and relative wages, causal evidence has so far been missing. We exploit the natural experiment of German reunification as an exogenous shock to female shares. Before reunification, East German women were not only more likely to participate in the labor market than their West German counterparts, but also participated more equally across occupations. Using the share of women among East German potential migrants in an occupation-age cell as an instrument for the actual female share in the West after reunification, we document that an increase in the female share in an occupation causally leads to lower wages for both men and women working in that occupation. This evidence is in line with the “devaluation hypothesis” developed in the sociological literature.