Hormones and the gender earnings gap

1. Hormones and the gender earnings gap

2. Why are there gender differences in labor market outcomes? Traditional explanations: • Employment segregation • Differences in human capital accumulation • Discrimination • Blau and co-authors (overview in Blau, “Gender, Inequality, and Wages”, OUP, 2012)

3. Why are there gender differences in labor market outcomes? Recent explanations: • Differences in psychological attributes: • Attributes towards competition, negotiation, risk • Social preferences • Croson and Gneezy (2009), Bertrand (2010), Dohment et al. (2011) • Differences in biological influences: • Brain structure • Hormones • Bertrand (2011)

4. Is there a biological basis for gender differences in preferences and personality? Testosterone is the principle androgen responsible for the development of sexually dimorphic physical characteristics in the male fetus, including those of the brain. “Brain organization theory” (Jordan-Young, 2010) posits that prenatal exposure to testosterone causes sexual differentiation of the brain, organizing the brain so that it is permanently predisposed to masculine or feminine patterns of desire, personality, and temperament.

5. Circulating testosterone and behavior Men with high circulatinglevels of testosterone have been found to be more: • agressive and competitive (Carre and McCormick, 2008) • risk-loving (Coates and Herbert, 2008) • entrepreneurial (White et al., 2006)

6. Prenatal exposure to testosterone and behavior Motherswith high serum levels of testosteronewhile pregnant have been found to have offspringwho display • more masculineplay and socialbehavior as preescoolers (Hines et al., 2002; Baron-Cohen et al., 2004) • greaterspatialabilities (Baron-Cohen et al., 2004)

7. Prenatal exposure to testosterone and behavior A lowersecond-to-fourthdigit (2D:4D) ratio, a common marker forgreaterprenatalexposure to testosterone, has been linked to • increasedaggression • (Hampson et al., 2002) • greaterfinancialrisk-taking • (Dreber and Hoffman, 2007 and • 2010; Garbarino et al, 2011) • greaterprofitability in financialtrades • and longercareers in finance • (Coats et al., 2009)

8. Twinning as a plausible natural experiment Amonglitter-bearing mammals, femaleswhodevelopadjacent to male litter-matesexhibit more masculinephysiology and behaviorsthanthosewho do not (VomSaal, 1989; Ryan and Vandenburgh, 2002)

9. Twinning as a plausible natural experiment Thisphenomenonlikelyapplies to humans as well. (Boklage, 1985; Baron-Cohen, 2004) Femalesfromopposite-sextwin pairs exhibit more typicallymasculinephysiologicaltraits: • Cranio-facialphenotype(Boklage, 1985) • Brainstructure(Cohen-Bendahan et al., 2004) • Auditorysystems(McFadden, 1993) • Higherbirthweight(Glinianaia et al., 1998) • Greatervisualacuity(Miller, 1994) • Largertoothsize(Dempsey et al., 1999) • Lower 2D:4D ratios(van Anders et al., 2006; Voracek and Dressler, 2007)

10. Twinning as a plausible natural experiment Femaleopposite-sextwinsalso have been found to exhibit more masculinesexually-dimorphicbehavioral and cognitivecharacteristicsincluding • improvedspatialabilities (Vuoksimaa et al., 2010; Heil et al., 2011) • lessexpressivevocabulary (Galsworthy et al., 2000; Van Hulle et al., 2004) • greaterlevels of agression (Cohen-Bendahan et al., 2005) • and sensationseeking (Resnick et al., 1993; Slutske et al., 2011) compared to femalesfromsame-sextwin pairs.

11. Twinning as a plausible natural experiment Similarly, also male same-sextwinsmay have greaterprenataltestosteroneexposure. They have been found to exhibitmasculinization of • brain volume (Pepper et al., 2009) • eatingbehavior (Culbert et al., 2008) • and vocabulary (Galsworthy et al., 2000; van Hulle et al., 2004) compared to malesfromopposite-sextwin pairs.

12. Research design Natural experiment: individualwith male twin has higherprenatalexposure to testosteronethanindividualwithfemaletwin. Identifyingassumptions: • Testosterone transfers from a male fetus to histwin • Gender of twin pairs is randomlyassigned • Gender of twinsibling does notinfluencelabormarketoutcomes via anymechanismotherthantestosterone transfer

13. Data MunicipalPopulationParent-Child Database (1995-2010) 14,602,884 individualswithfather and/ormotherID-number MunicipalPopulation Dataset (1995-2010) Demographics (birthdate, marital status, number of children, race, place of residence) Incometax files (2009) Annualincome, hoursworked, firmsize, industry Sample: twins and singletonswithclosely-spacedsiblingsbornbetween 1959 and 1979 (aged 30-50 in 2009).

14. Estimation Double-difference estimate of the effect of the effect of opposite-sextwinningonearningsusing a sample of twins and singletonswithclosely-spacedsiblings:

15. Conclusion The ideathat men and women are biologically “wired” byprenatalexposure to testosterone to think and act differently has been prominent in recent discussions and controversies over women in math and science, sexdisparities in wages, and trading behavior in the recent financial crisis. Ourstudy • Identifies a plausible experiment for a moderate “shock” to prenatal • exposure to testosterone. • Men with a male twinbrother are found to have higherearnings; this effect is • absent forwomen. • Genderdifferentialmay in part beexplainedbyanearnings premium that • men receiveforcharacteristicsassociatedwithprenataltestosterone • exposure. • However, results do notsuggestthatwomenwouldreceivesimilar premiums • forbehaving in a more typicallymasculinefashion.