IZA DP No. 3662: New Evidence on the Motherhood Wage Gap
Using data from the 1979 National Longitudinal Survey of Youth, we assess the role of employment-based health insurance offers in explaining the motherhood wage gap. Researchers have been aware of the existence of a motherhood gap for many years; yet, the literature has failed to address the role of non-wage compensation in explaining the motherhood wage gap despite the increasing importance of non-wage benefits in total compensation packages. As hedonic wage theory suggests, mothers might view health benefits as desirable and trade-off wages for health insurance. Thus, lower wages for mothers might reflect their relative preferences for jobs offering health insurance. We estimate an endogenous switching wage equation model to account for the self-selection and, thus, endogeneity of having an employment-based health insurance offer. We find that, once the endogeneity of having an employment-based health insurance offer is accounted for, the motherhood wage gap disappears.