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Causal Misperceptions of the Part-Time Pay Gap

Author

Listed:
  • Annekatrin Schrenker

    (DIW Berlin and FU Berlin)

Abstract
This paper studies if workers infer from correlation about causal effects in the context of the part-time wage penalty. Differences in hourly pay between full-time and part-time workers are strongly driven by worker selection and systematic sorting. Ignoring these selection effects can lead to biased expectations about the consequences of working part-time on wages (`selection neglect bias'). Based on representative survey data from Germany, I document substantial misperceptions of the part-time wage gap. Workers strongly overestimate how much part-time workers in their occupation earn per hour, whereas they are approximately informed of mean full-time wage rates. Consistent with selection neglect, those who perceive large hourly pay differences between full-time and part-time workers also predict large changes in hourly wages when a given worker switches between full-time and part-time employment. Causal analyses using a survey experiment reveal that providing information about the raw part-time pay gap increases expectations about the full-time wage premium by factor 1.7, suggesting that individuals draw causal conclusions from observed correlations. De-biasing respondents by informing them about the influence of worker characteristics on observed pay gaps mitigates selection neglect. Subjective beliefs about the part-time/full-time wage gap are predictive of planned and actual transitions between full-time and part-time employment, necessitating the prevention of causal misperceptions.

Suggested Citation

  • Annekatrin Schrenker, 2023. "Causal Misperceptions of the Part-Time Pay Gap," Rationality and Competition Discussion Paper Series 372, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:372
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    References listed on IDEAS

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    Cited by:

    1. Kai Barron & Steffen Huck & Philippe Jehiel, 2024. "Everyday Econometricians: Selection Neglect and Overoptimism When Learning from Others," American Economic Journal: Microeconomics, American Economic Association, vol. 16(3), pages 162-198, August.

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    More about this item

    Keywords

    part-time pay gap; wage expectations; selection neglect; causal misperceptions;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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