The Male–Female Wage Gap and the Firm Effect: The Case of Young Italian Workers

The idea that wages are determined by firm and individual characteristics suggests that there is a firm effect that influences wage differentials. This paper presents the results of an empirical analysis of gender wage differentials — based on INPS data for people between the ages of 20 and 25 employed in the private sector in 1996 — which takes into account the characteristics of workers and firms using a two‐level random‐effects model. Firm variables proved to be significant, and the proportion of females in the firm showed a negative effect on the wages of both men and women.