Why Do Women's Wages Increase So Slowly Throughout Their Career? A Dynamic Model of Statistical Discrimination

The aim of this paper is to explain the growing wage differentials between men and women during their working careers. We provide a dynamic model of statistical discrimination, which integrates specific human capital decisions: on-the-job training investment and wages are endogenously determined. We reveal a small wage differential at the beginning of women's career, but women's wages increase more slowly; this is partly due to a lower level of human capital investment by women and partly because firms smooth training costs between different periods.