IN 2006, THE DANISH government passed legislation requiring firms
with more than 35 employees to report salaries for groups of
employees, broken down by gender, and to inform their employees
of any pay discrepancies between men and women. But did the law
have its intended effect—did it close the country’s gender pay gap?
A new study quantifies the impact of Denmark’s law by comparing
wages and other factors before and after its passing.
The paper’s co-authors include Morten Bennedsen, a
professor of economics at INSEAD in Fontainebleau,
France; Elena Simintzi, assistant professor of finance
at the University of North Carolina’s Kenan-Flagler
School of Business in Chapel Hill; Margarita Tsoutsoura,
associate professor of finance at Cornell
University’s S.C. Johnson College of Business in
Ithaca, New York; and Daniel Wolfenzon of Columbia
Business School in New York City.
The researchers found that the wage transparency
law slowed salary growth for men by 1.67 percent,
compared to salary growth for men at firms in a
control group, thereby reducing the salary gap between men
and women. (Salaries for women at affected firms increased by
.28 percent, but this was not a statistically significant amount.)
Affected firms hired more women and promoted women more
often to senior positions than firms in a control group. At the same
time, workers at affected firms saw lower wage increases than their
counterparts in the control group (due to slower salary growth for
men), and their productivity decreased by 2.5 percent.
But lower wage costs offset the decrease in productivity.
“Governments ... have proposed transparency as
a tool to nudge firms to reduce the wage gap between
men and women,” the co-authors write. “Regulatory
mandates on pay transparency, as a means to overcome
biases against women in the workforce, may
be effective in closing the gender pay gap.”
Read the working paper “Do firms respond to gender pay gap transparency?”