Labor Market Beliefs and the Gender Wage Gap

We study the role of labor market beliefs in the gender pay gap. We find that, on average, women expect to receive lower salaries than men and also expect to receive fewer offers when employed. Gender differences in expectations explain a sizable fraction of the residual gap in reservation wages. We estimate a partial equilibrium job search model that incorporates worker heterogeneity in beliefs about the wage offer distribution, arrival rates, and separation rate. Counterfactual exercises show that labor market beliefs play an important role in the gender wage gap, but matter little for the gender differences in welfare. Eliminating gender differences in the actual offer distribution, by contrast, decreases the gender gap in pay and welfare.