Unpacking the Child Penalty Using Personnel Data: How Promotion Practices Widen the Gender Pay Gap

Uppsala University

with Takeshi Murooka (Osaka University) and Shintaro Yamaguchi (University of Tokyo)

We estimate the child penalty using personnel data that enables us to decompose the penalty into different pay components. The estimated penalty is driven by time-based pay immediately after childbirth. Subsequently, however, job-rank-based pay becomes increasingly significant, eventually becoming the dominant factor by the 15-year mark. This shift is interconnected: reduced working hours lead to lower performance evaluations, which in turn limit promotion opportunities. Our theoretical model demonstrates that current promotion practices can cause production inefficiency. Addressing them would reduce the penalty and improve talent management, making a business case for gender equality.