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The influence of risk preferences
and competitiveness of women on
the wage gap
Erasmus School of Economics
Bachelor Thesis in Economics & Business Economics (Economie &
Bedrijfseconomie)
Submitted by: H.P. van den Bergh
Student number: 346793
Supervisor: Ilke Aydogan
Date: 17-07-2015
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Table of contents

Abstract page 3

Introduction page 4

Motivation page 5

Literature review page 6
o Literature on the wage gap pages 6-8
o Literature on differences in preferences & literature on the difference in
risk preferences pages 8-11
o Literature on negotiation competitiveness pages 12-13
o Literature on nature versus nurture pages 13-15

Summary of literature review pages 16-19

Discussion pages 20-21

Conclusion page 22
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1. Abstract
Women earn on average less for preforming the same work as men. This is called the
wage gap. In this thesis, the differences in preferences in competitiveness and risk
between men and women are examined in order to shed light on how they affect the
wage gap. This is done by using a literature study to compare the different articles
written on the subject. The literature will be split into four sections “ Literature on the
wage gap”, “Literature on differences in preferences & literature on the difference in
risk preferences”, “Literature on negotiation competitiveness” and “Literature on nature
versus nurture”. The major conclusion is that women are more risk averse than men
and this affects both their career choices and salary. At the end of the article
recommendations on how to close the wage gap will be given, and a suggestion for
future research will be made.
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2. Introduction
There has been a lot of discussion in the recent months on the difference between
men and women in career paths and the differences in earnings. One recent example
of this was a proposal by the Dutch government to introduce a quota for women in the
boards of big corporates in the Netherlands. Another proposal by the government was
to introduce a database of women which could be chosen for such a function. It is
therefore clear that the government thinks that there is a significant difference between
earnings of men and women. In this thesis I will try to explore if this wage gap has
anything to do with the different career choices men and women make based on risk
aversion and willingness to compete.
In this thesis I will investigate the differences between men and women which are
expected to play a role in their respective career choices using a number of different
scientific articles. These articles will be compared and studied to give a clear answer
to the question: “Is the wage gap caused by women’s preferences of risk and
competiveness”. In this thesis this research question is explored through a thorough
review of the available literature on gender differences. The literature review will be
split in different sections based on the topics that are relevant to answer the research
question. The conclusion that can be drawn from various studies cited in this thesis is
that, there is a wage gap at the moment which may be attributedto the different
degrees of risk aversion between men and women. This conclusion has important
implications for policy makers which will be discussed at the end of this thesis and a
future research will be proposed.
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3. Motivation
My motivation behind this thesis is that there is at the moment a discussion in the
Netherlands about the so called wage gap (Lips, 2013). The wage gap implies that
men and women get different wage for the same job. In an article on the wage gap
on the Guardian (Topping, 2015)it is shown that there is a pay gap of 16.9% in the
Netherlands, furthermore there is a pay gap of 19.1% in the UK. This shows that there
is a significant difference in the pay that men and women get.
The article also
mentioned that the gap has been closing the last years, but that the progress has been
very slow.
The first question of why the pay gap exists in the first place is an important one
because identifying the factors at stake is the key for effective economic policies, and
might help to come to a solution on how to solve the wage gap. In this thesis I will
search for some of the underlying factors that might help explain the wage gap.
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4. Literature review
This thesis will use a literature review to explore the different opinions voiced in the
different papers written on the subject matter. In the summary section these findings
will be summarized in a comprehensive manner and finally in the discussion I will
discuss what kind of further research will be necessary. Furthermore, the literature is
divided into subsections. In section 4.1. I will provide a review of literature on wage
gap. In this section, I will present empirical findings on wage gap in previous research.
In the next sections 4.2 and 4.3, I will review the literature on gender differences in
preferences in fields that are expected to play a role in career decisions. In these
sections I will focus on gender differences in risk preferences and competitiveness
which were commonly investigated in the literature. In the section literature on
negotiation competitiveness, I will look at the different ways in which men and women
negotiate. Finally in section 4.4, by looking in to the literature on “nature versus
nurture”, I will further explore the reasons behind gender differences with a discussion
of nature versus nurture arguments.
These subsections serve the purpose of structuring the literature review, after the
literature review these subsections will be summarized and discussed in section 5.
4.1 Literature on the wage gap
In the article “The Gender Pay Gap: Have Women Gone as Far as They Can?” by
(Blau & Kahn, 2007) the wage gap (or gender pay gap as it is called in this article) is
discussed at length. The article shows the trend that the gender pay gap has followed
and offers some explanations for its causes and its effects. After the Second World
War the gender pay gap has been closing, this is mainly due to the increasing amount
of women in the labor force. Furthermore in the 1990’s the wage gap had closed even
more to around 80%, this was also due to the overall status of the labor market. The
general inequality in the labor market had decreased further during these years and
that also affected the gender pay gap. It is argued that in the future there will be a
further decrease in the gender pay gap; however the change will come more gradually
than before. This is mainly because of the fact that women are already participating
more in the labor market and also are better educated than they were decades ago.
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After reading this article one might argue that the wage gap/pay gap is closing however
it has not closed as of yet.
The article by (Lips, 2013) the relevance of the wage gap is discussed. The author
comes to the conclusion that there does exist a wage gap between men and women.
Even in CEO pay there exists a difference in pay even when controlled for differences
in human capital organizational size and performance variables. The working paper
by (Mesch & Rooney, 2004) the gender pay gap between female and male CEO’s is
12000$ in salary and between 7000$ and 9800$ in bonus annually. Other studies
however conclude that while CEO pay may not differ very much between genders,
that there does seem to be a gender wage gap in among the larger non-CEO top
executives. However not only does the gender of the employee matter in determining
the amount of salary, also the perception of the job is of huge importance to the pay
received.
This is shown in the article by (Alksnis, Desmarais, & Curtis, 2008) titled “Workforce
Segregation and the Gender Wage Gap: Is “Women’s” Work Valued as Highly as
“Men’s”?”, discusses the different levels of pay for jobs that are perceived as more
masculine and jobs that are perceived as more feminine. The article looks at three
type’s classes of jobs, low, medium and high paying. For example the low paying job
was labeled as a department store clerk job with the masculine job called a hardware
store clerk and the feminine job labeled the china/crystal store clerk. There was found
to be pay discrimination between jobs that are perceived as more masculine and jobs
that are perceived as more feminine, the more masculine jobs would pay better. This
was even the case for jobs that were perceived as equal, even then there was a
difference in pay between men and women.
Furthermore the effect of children as discussed in the article “The Effect of Children
on Women's Wages” by (Waldfogel, 1997) also has a significant effect on wage. It is
made clear that having children affects the wage a woman earns, and in the article
there talk of a family gap. The lower wage is partly due to the effect that when a woman
becomes a mother she will generally speaking start to work less and in some cases
start to work part time. The effect of working part time on wages is severe, on average
a part time working woman earns 10% less than a full time working woman. The effect
of children on wage is also significant where a woman earn about 4% less after her
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first child and about 12% less after her second child. This means that there is another
significant factor in the wage gap, namely maternity. The author argues that this gap
may originate due to the work and family conflict, where either employer perceptions
or employee adjustments may have a negative effect on wage.
4.2 Literature on differences in preferences & literature on the difference in risk
preferences
Besides the factors described in the section on the wage gap such as the labor market
conditions and maternity, there might be other factors which influence the wage gap.
In this section the differences in preferences and differences in investments between
men and women is discussed. In the article “Differences in the economic decisions of
men and women: experimental evidence” by (Eckel & Grossman, 2008), the
researchers are looking if there are differences between men and women in behavior
using the results gained from public goods, ultimatum and dictator experiments. The
results of the article are that the behavior of men and women does not differ much
when playing the public gods, dictator and ultimatum games. However when risk is
introduced into the game women tend to make more socially oriented choices and less
individually oriented choices. Risk was introduced in these games through first a oneshot design and then a repeated play design. In the second game women were more
risk averse. This shows that women do not prefer situations where risk plays an
important factor.
In the article by (Croson & Gneezy, 2009) the gender differences in social preferences
and risk attitudes are discussed. In this article it is also shown that women are
generally more risk averse than men, however there is an important exception for
managers, there men and women are more similar in terms of risk aversion. Important
factors that contribute to women being more risk averse are emotions overconfidence
and framing. It is also suggested that women’s social preferences are different than
men’s and that this may lead to a higher variability in women’s behavior. Finally it is
suggested that women have a lower preference for competitive situations than men
and that therefore men therefore perform better in these situations.
However not only is the difference in risk preference important in distinguishing men
and women, it also important how men and behave in a competitive environment. In
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the article (Gneezy, Niederle, & Rustichini, Performance in Competitive Environments:
Gender Differences, 2003) the differences between men and women in competitive
environments is discussed. Their main research question was whether women
perform just as well as men in a competitive environment. This hypothesis is tested
using a lab experiment where entrants are either paid a piece rate or paid using
tournament incentives. When in a mixed gender tournament women perform worse
than men. If however women compete in a single gender tournament they perform
better. This change may be due to the fact that women consider themselves less
competent than men and therefore they shy away from competition. This affects the
labor market chances of both men and women.
However there might be differences between different groups within a population this
is shown in the article “Decision Making, Risk and Gender: Are Managers Different?”
by (Powell & Johnson, 1994) where the differences in risk taking between a pool of
managers and a pool of non-managers is explored. The authors are investigating if
there is a significant difference in attitudes towards risk in the two groups. In the paper
the conclusion is drawn that men and women do not differ on the quality of the
decisions made, also in the pool of managers there was no difference in risk aversion
between men and women. However among the non-manager group there was a
difference in risk aversion. Furthermore the quality of the decision’s made and the level
of risk aversion was more closely linked to the level of management training the
individual had received.
Also of importance in distinguishing the different preferences between men and
women is the level of ambiguity aversion. In the article “Gender differences in risk
aversion and ambiguity aversion” by (Borghans, Golsteyn, Heckman, & Meijers, 2009),
it is explored whether men and women are different in risk and ambiguity aversion.
What the article is measuring is how the willingness to pay increases as the level of
ambiguity decreases. It is found that women initially respond more favorably to a
decrease in ambiguity compared to men. This means that their willingness to pay does
not change as the ambiguity is decreased. However when the ambiguity of the choices
is increased pas a certain level the difference between men and women vanishes.
This means that after a certain point of ambiguity men and women have the same
marginal valuations of ambiguity. This experiment shows that while risk aversion is
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important, it is also important how the experiment is set up and how ambiguous it is.
This is of importance because men and women react differently to different levels of
ambiguity.
This is also shown in the article “Financial Decision-Making: Are Women Really More
Risk-Averse?” by (Schubert, Brown, Gysler, & Brachinger, 1999) the classic literature
regarding the fact that men are more risk seeking than women is challenged. This
research finds that with gambles men are more risk prone to gains and women are
more risk prone to losses. The findings suggest that the difference in reported risk
aversion is related to the opportunity sets presented. It is pointed out that the problem
with the previous research on the subject is that the framing and the context of the
question is of vital importance.
In the article “Men, women and risk aversion: experimental evidence” by (Eckel C. C.,
2008) it is tested if men and women systematically differ in their measure of risk
aversion. In the article Eckle makes the remark that if men and women systematically
differ in their risk aversion that this will affect all aspects of their decision making. This
includes choice of career and investment opportunities to different goods consumed.
The conclusions of the experiments are that the field studies conclude that women are
more risk averse than men. In the article by (Eckel C. C., 2008) several field studies
are used to come to this conclusion, for example both real world gambling data is used
as well as pension fund contribution.
However the findings from laboratory
experiments are less conclusive. But this may be due to the fact that there is little
comparability between the experimental studies. The difficulty with comparing studies
is that there are often different forms of risk used, the potential payoffs and the degree
of risk as variance. Finally it is argued that it is difficult to compare the conclusions of
lab studies and field studies because it is more difficult in field studies to account for
differences in knowledge, wealth and marital status and other demographic factors
that might bias measures of male/female differences in risky choices according to
(Eckel C. C., 2008).
The link with women having less risky assets is also shown in the article “Are women
more risk averse?” by (Jianakoplos & Bernasek, 1998), it is researched whether single
women exhibit relatively more risk aversion in financial decision making than single
men. These findings were gathered using a field study, in the study it was investigated
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if either men or women held more risky assets. The findings are that women are
significantly more risk averse in financial decision making, and that therefore their
relative wealth might be smaller. This is because they held less risky assets which on
average generate more money. There are some limitations to this research, mainly
that it only focuses on single men and single women, and that these groups might not
give an accurate description of all men and women.
The link between assets and risk aversion is further explored in the article “Gender
differences in revealed risk taking: evidence from mutual fund investors” by (Dwyer,
Gilkeson, & List, 2002) the authors are trying to find a link between the gender of
mutual fund investors and their level of risk taking. The findings show that women are
less risk taking than men in their most recent, largest, and riskiest mutual fund
investment decisions. The effect of this is that women are less likely than men to invest
in riskier assets who in general have a higher rate of return (Dwyer, Gilkeson, & List,
2002). This is also discussed in the article by (Jianakoplos & Bernasek, 1998) named
“Are women more risk averse”. However the difference of this study is that this study
takes a closer look at mutual fund investors, and therefore tries to control for a
knowledge gap that might exist. The results in this article are that women take less
risk than men in their mutual fund investments. However the results are less
conclusive when knowledge is taken into account.
What might also play a role in the difference of investment decisions is the level of
confidence men or women feel when making an investment decision. In the article
“The Gender Gap on Wall Street: An Empirical Analysis of Confidence in Investment
Decision Making” by (Estes & Hosseini, 1988) it is researched how confidence affects
the investments people make. The difference between men and women is explored
and it is reported that women are less confident about their decisions than men. This
is also the case when a man and a woman make the same investment decision; in this
case there still exists a difference in confidence about the decision made. Also of
importance was the group the man or woman belonged to, the confidence of stock
investors was lower than that of professional investors or than that of the researched
general business group.
4.3 Literature on negotiation competitiveness
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What is also of importance is the difference in negotiation competitiveness between
men and women. In the article “Gender and Negotiator Competitiveness: A Metaanalysis” by (Walters, Stuhlmacher, & Meyer, 1998) the authors reviewed a total of
157 different studies on the gender and competitiveness. Out of these 157 different
studies a total of 62 were included in a meta-analysis done by the authors. The
research done shows that while men are more competitive in face to face negotiations,
the effects of gender were essentially zero when there was a matrix style negotiation.
In a matrix style negotiation where negotiation is done through a series of offers and
counter offers. However when there was more interaction between participants in a
matrix study women became more cooperative and less competitive. Men seem to
maximize their personal gain more often in the matrix games. In a final note by the
authors it is mentioned that although there were differences between men and women,
the magnitude of these differences was very small. The results changed when the
question was framed differently.
In the article: “Who Goes to the Bargaining Table? The Influence of Gender and
Framing on the Initiation of Negotiation” by (Small, Gelfand, Babcock, & Gettman,
2007) it is discussed if men and women have different attitudes toward a situation in
which a negotiation may take place. The main reported difference between men and
women is that men are more likely to initiate a negotiation than women. When the
researchers started cuing the participants on when to initiate the negotiation women
started to negotiate more often, however still less than men. Also men were more likely
to ask for something during the negotiation and in general had a more positive attitude
towards negotiating. These findings are in line with other research done on the topic,
women have a more negative attitude towards negotiating than men. For example the
article by (Gneezy, Niederle, & Rustichini, Performance in Competitive Environments:
Gender Differences, 2003) describes that the level of confidence of women is
generally lower than that of men. This might affect their effectiveness in negotiations.
The working paper by (Niederle & Versterlund, 2005) also focuses on whether women
shy away from competition and if men compete too much. This is based on
experimental data where the researchers tested whether men and women behave
differently when faced with different compensation schemes. Men and women were
put in a lab and were made to perform a simple task, they could be paid using either
a piece rate or using a tournament, in which the best contestants would receive more
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money. The results of the test were that women more often than men would choose
the piece rate. This leads to the conclusion of this working paper are that women are
most of the times do not compete and do not engage in discussions about salary. Men
on the other hand are doing this more often, this may be an explanation why men earn
more than women.
4.4 Literature on nature versus nurture
There is also literature on the difference between nature and nurture these two
different factors interact with each other in the following section this will be further
explored.
In the article “Gender Differences in Competition: Evidence from a Matrilineal and a
Patriarchal Society” by (Gneezy, Leonard, & List, Gender Differences in Competition:
Evidence from a Matrilineal and a Patriarchal Society, 2009) the differences between
a Matrilineal and a Patriarchal Society are discussed. First there is an explanation
what defines a Matrilineal and Patriarchal society and how men and women react
differently to risk in these two societies. This research is important because it shows
how differences in upbringing and culture can affect the differences in risk aversion
between men and women.
A matrilineal society is a society where the woman is the head of the household and
takes all major decisions concerning the family. The society chosen for this experiment
are the Khasi, a clan in northeastern India. This society is according to the paper a
society where the household is headed by the grandmother, and all her unmarried
daughters live in her home as well. Furthermore when the youngest daughter marries
her husband also moves in to the home headed by the mother of the youngest
daughter. The men in these households hold no important social positions and are
expected to work for the gain of his wife’s family (Gneezy, Leonard, & List, Gender
Differences in Competition: Evidence from a Matrilineal and a Patriarchal Society,
2009).
A patriarchal society is a society where the man is the head of the household and
makes all important decisions regarding family life. The society chosen for the
experiment were the Maasai a semi-nomadic group of people who inhabit parts of
southern Kenya and northern Tanzania. It is said in (Gneezy, Leonard, & List, Gender
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Differences in Competition: Evidence from a Matrilineal and a Patriarchal Society,
2009) that for Maasai men his wives are less important than his cattle.
Seeing how vastly different the role of men and women in these two societies is the
researches decided to make a comparison on the risk taking behavior between the
men and women of the Khasi tribe and between the men and the women of the Maasai
tribe. The results were that the women of the Khasi (the matrilineal society) are more
risk seeking than the men of the Khasi tribe. Also the men of the Maasai (the
patriarchal society) are more risk seeking than the women of the Maasai tribe. This
demonstrates the different effects nature and nurture have on the differences in risk
seeking. It shows that the way society sees men and women and what their culture
expects of them has a major impact on the risk aversion of the individual. The fact that
women who are raised as head of the household are more risk seeking then men who
are not shows that upbringing has a very significant effect on the risk taken by these
individuals.
However not only upbringing is important as shown in the article “Gender differences
in financial risk aversion and career choices are affected by testosterone” by
(Sapienza, Zingales, & Maestripieri, 2009) the link between the salivary concentrations
of testosterone and the markers of prenatal testosterone exposure and the amount of
risk a person is willing to take is explored. The authors state that on average men are
more likely to make risky (career) choices than women. They state that in their
academic institutions 36% of the female MBA students chose a risky career in finance
(eg. investment banking or trading), whereas 57 of male students do so (Sapienza,
Zingales, & Maestripieri, 2009). They state that although social and cultural behavior
might affect this, there might also be an underlying biological factor, namely the levels
of the hormone testosterone.
There are two measurements being used by the researchers, namely the amount of
prenatal testosterone and the concentration of salivary testosterone. The test group is
a group of 550 MBA students at the University of Chicago. This population is relatively
homogenous in their socio-economic background and is well aware of financial risk
taking.
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The findings of their research indicate that men are more risk taking than women.
However only for women the concentration of salivary testosterone and risk aversion
was a significant negative correlation. Also the correlation between testosterone and
risk aversion is stronger in women than in men, but when controlled for very low
concentrations of testosterone (31% of the men and 90% of the women) the gender
differences disappeared. This shows the impact of nature in the amount of risk women
take, because of the fact that when more testosterone is present women take more
risk.
Upbringing and biology might not be the only factors at play here however; evolution
might also play a role. In the article “Women, Power, and Sex Composition in Small
Groups: An Evolutionary Perspective” by (Colarelli, Spranger, & Hechanova, 2006)
the authors explore the different ways in which men and women behave small groups.
The way in which humans have evolved has shaped the way in which humans interact
with one another in a way. For evolutionary purposes it was more beneficial for men
to form territorial male groups and for women to form more stably bonded, familycentered groups (Colarelli, Spranger, & Hechanova, 2006). The authors used this
explanation to describe why there were relatively few women in top management
positions. In top management it is more beneficial to be more competitive and
therefore men might have an evolutionary advantage over women.
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5. Summary of literature review
The wage gap has been shrinking since the Second World War, this is because of the
increased participation of women in the labor force (Blau & Kahn, 2007). This shows
that a society has come a long way in closing the wage gap between men and women.
However there are still less female CEO’s and women make less than men in upper
management positions (Lips, 2013). This shows that there are still differences between
men and women on the labor market and that men are still being paid more. According
to (Alksnis, Desmarais, & Curtis, 2008) this might be because of the different ways in
which jobs are perceived. There exists a gap between jobs that are seen as more
masculine and jobs that are seen as more feminine. This might explain some of the
difference in pay between men and women. Furthermore the article by (Waldfogel,
1997) shows that the effect of children on a women’s wage is very negative. In
conclusion the wage gap between men and women has been closing for a while, to
around 80 % today, but there still is a gap. The causes of this gap may lie in the
perception of jobs and because of the negative effect that children have on a mother’s
wage.
Another important factor which affects the career choice of men and women is the
difference in preferences. The article by (Eckel & Grossman, 2008) explains that when
risk is introduced into public goods, ultimatum and dictator games women tend to
make more socially oriented choices. This may explain part of the wage gap because
it may be so that when men make more individually oriented choices they end up with
a higher wage. The article by (Croson & Gneezy, 2009) also tells that women have a
lower preference for risk than men. Women are more risk averse than men are is said
in the article and this might explain why they earn lower wages. However this gap in
risk preference closes when looking at managers. Men and women have equal
preferences for risk if one looks at a population of managers. One premature
conclusion that one can derive from this is that women need a certain amount of risk
seeking behavior to succeed as a manager. Finally the article by (Gneezy, Niederle,
& Rustichini, Performance in Competitive Environments: Gender Differences, 2003)
argues that women are not as confident in their abilities as men. It is also said that
women do not like a competitive environment as much as men do. Therefore men may
have an inherent advantage in mixed gender professions where they might excel.
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Also of importance are the differences in risk preference between men and women. In
the article by (Eckel C. C., 2008) it is shown that men and women have different
preferences for risk. This affects all the choices that they will make in their lives, from
jobs to goods consumed. Therefore the level of risk aversion a person has, affects
their entire life. These preferences also affect the way in which women invest
(Jianakoplos & Bernasek, 1998) this in turn affects the relative wealth of men
compared to women. While this does not directly affect the wage gap it does show
that there are also causes besides wage which affect how much money women earn.
The article by (Schubert, Brown, Gysler, & Brachinger, 1999) sheds some light on this
subject. There might be a difference in the way men and women perceive risk, women
were more sensitive to losses and men were more sensitive to gains. Thus framing
plays an important role together with risk in how decisions are made. However (Powell
& Johnson, 1994) also come to the conclusion that there is a difference in risk
preference between men and women, but as stated by (Croson & Gneezy, 2009) this
difference disappears when looking at managers. Furthermore the research by (Powell
& Johnson, 1994) shows that the quality of decisions made by managers does not
correlate with their level of risk preference. However the amount of experience a
manager has does contribute to the quality of the decisions he or she makes.
The biological differences between men and women also play a role in determining
the level of risk preference in men and women. The effect of the hormone testosterone
should not be underestimated. As shown in the article by (Sapienza, Zingales, &
Maestripieri, 2009) that the effect of testosterone on risk making is significant. Another
factor that leads to the difference in the risk taking behavior of men and women is that
there are certain socio-economic and cultural factors at play. This can be seen in the
article by (Gneezy, Leonard, & List, Gender Differences in Competition: Evidence from
a Matrilineal and a Patriarchal Society, 2009). In this article the difference between a
matrilineal and a patrilineal society is shown. The effect this has on both men and
women living in both these societies is very showing of how socio-economic and
cultural factors affect the amount of risk men and women are willing to take. The men
in the Maasai tribe are shown to be more risk taking than the females of the Maasai
tribe. This is in congruence with what we see in the other papers, namely that men are
less risk averse than women. However in the example of the Khasi tribe in northeastern India the roles of gender are almost reversed. Here the women take all the
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important decisions regarding family life and financial decisions. The women in the
Khasi tribe are more risk seeking than the men of the Khasi tribe. This is a reversal of
the traditional gender roles and shows that the culture in which a person is raised
greatly affects their risk preference. In an article by (Colarelli, Spranger, & Hechanova,
2006) there is an interesting conclusion on how men and women behave differently in
small groups. Historically it has been more beneficial for men to be more competitive
in small groups than it has been for women. This affects the way in which men and
women function in higher level management which favors the competitive men more.
Investments are also made differently by men and women as shown in the article by
(Dwyer, Gilkeson, & List, 2002). It is shown that men take on more risk when making
their investments than women do. This affects the rates of return men and women get,
usually the riskier investments provide a higher rate of return. What was also of
importance was that when men and women make the same investment decision, men
are more confident of their choice (Estes & Hosseini, 1988). This affects the way in
which men and women invest.
Finally of importance to explaining the wage gap is the difference in negotiation skills
that men and women have. In the article by (Walters, Stuhlmacher, & Meyer, 1998) it
is concluded that men are better at face to face negotiations. This effect lessens when
there is a matrix style negotiation going on, but most negotiations about salary are
face to face. Thus it seems that men have a distinct advantage in negotiating salary,
and this might explain some of the wage gap. The working paper by (Niederle &
Versterlund, 2005) also came to the same conclusion. What amplifies these effects is
described by (Small, Gelfand, Babcock, & Gettman, 2007). They come to the
conclusion that men also initiate a negotiation more often. Men feel like they should
negotiate and are also better at them, this offers a partial explanation as to why men
earn on average a higher salary.
In conclusion, there exists at this moment a wage gap in the western world. This
wage/pay gap can be explained by the different preferences of men and women. Also
of importance is the society in which men and women are raised and the biological
differences between men and women. This affects the way in which they invest, and
also affects the way in which they negotiate. These factors all contribute to the
wage/pay gap that exists at the moment in the western world.
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6. Discussion
I think that with the factors described in my literature review, namely (risk) preferences,
negotiation competitiveness and nature versus nurture there is a solid basis for what
causes the wage gap. What would be beneficial is if there was a comprehensive study
which considers all these factors and measured in a field study in order to see what
the effect of each of these factors is on the wage gap between men and women.
19
On the website of Eurostat (eurostat) there is a data file which has information on the
wage gap. This data file uses the dependent variable wage and the independent
variables sex, age, occupation, length of service and education for the years 2002,
2006 and 2010. The website of the CBS (CBS) also has data on the Dutch population
regarding wage and sex, however this is less detailed than the one provided by
Eurostat. The data was gathered by surveys sent to people throughout Europe.
Using this data one can determine more accurately what the effect of the wage gap
the last few years has been. However there are still factors that my research showed
as influential to the wage gap which do not appear in these datasets. These factors
are the risk aversion, ambiguity aversion and competitiveness. It would be best if these
factors were measured in choice and game experiments as in the studies cited in this
thesis. The amount of testosterone could also be tested before starting the experiment,
however this could be hard to obtain in a field study. The design of the experimental
questions for risk aversion, ambiguity aversion and competitiveness could be similar
to the one used in (Gneezy, Niederle, & Rustichini, Performance in Competitive
Environments: Gender Differences, 2003). The experiment that was used in the
research was a game of a computerized maze. The participants had to solve a maze
on the computer and the payout was first based on the amount of mazes they
successfully solved, the second time only the best participant in a group was paid.
This experiment was done in a lab but it could easily be repeated by mailing subjects
the software required to solve the mazes and tell them the composition of their group.
In this mail there could also be a questionnaire which asks questions regarding
occupation, wage, age, sex, marital status, cultural identity and the amount of children
of participants. This leads to a situation where there are a lot of independent variables
to influence the dependent variable wage. A regression analysis would then show
which of these factors are statistically significant. It would be more difficult to include
testosterone measurements if the survey was sent by mail, however if the survey was
sent by mail it would greatly reduce the costs of the research and at the same time
increase the reach.
After this research has been done the government could use this research as a
guideline on how to further close the wage gap. The government would be able to see
what factors it could influence. For example if the research reveals that there is
discrimination against women in the labor market the government could take action. If
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however the research reveals that a large part of the wage gap is caused by the
preferences of women it would be harder to implement policies which would change
this. However the government could start programs which teaches women to be more
competitive but it will take more time for these changes to show an effect.
Finally it is important to note that although the research done has been very thorough
there always exists a publication bias, meaning researchers are more likely to write a
report when they found something than when they find nothing (Croson & Gneezy,
2009).
7. Conclusion
In conclusion the wage gap which is discussed in this article has existed since the
Second World War however the last couple of decades the wage/pay gap has been
steadily shrinking. However there still exists a wage gap at this point in time and there
are a number of factors which influence this wage gap. Besides the labor market
conditions, the main ones are gender differences in risk preferences, the negotiation
competitiveness and the nature versus nurture argument. Women are less likely to be
risk takers. They have a lower preference for risk. Men, on the other hand, are more
risk seeking. This affects the career choices of both men and women, men are more
21
likely to choose more risky and therefore higher paying careers. Women are also less
comfortable when they have taken a risk and are less likely to compete with men. This
also shows in the negotiation competitiveness, men are more likely to negotiate than
women, men also feel more at ease when they negotiate and this also explains a part
of the wage gap. Finally there is the nature versus nurture debate in which it is explored
whether these differences are due to cultural or due to biological factors. Both these
factors it seems to have a role to play, when women are raised as heads of the
household they are more likely to be risk takers, this shows that cultural factors play a
major role in how risk seeking women are. However there is also the fact that when
women have higher amounts of testosterone they are also more likely to be risk
seekers. In short all these factors contribute to how men and women choose their
different career paths and how the wage/pay gap came into being. A future research
investigating both the competitiveness and risk aversion of women can shed more light
on how much effect these factors have on the wage gap and how and if the
government has power to influence this.
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