A large experimental literature has documented robust gender differences in risk preferences and overconfidence. Since searching for a job is inherently a dynamic process that involves significant uncertainty, gender differences in preferences and beliefs are likely to lead to gender differences in job search behavior and starting salaries. In this paper, we empirically and theoretically examine the interaction between risk preferences, overconfidence, job search behavior, and its resulting impact on starting pay.
We begin by establishing some facts about gender differences in the job search process utilizing information on job offers and acceptances from a survey of business undergraduate alumni from Boston University. We document a clear gender difference in the timing of job offer acceptance – a simple hazard analysis reveals that females accept an offer at a rate that is 18% faster than for males. Interestingly, the gender earnings gap in accepted offers narrows in favor of women over the course of the job search period. To rationalize the empirical patterns, we develop a job search model that incorporates gender differences in risk aversion and in the degree of confidence about the offer distribution that individuals face. The model generates a decline in the gender gap in accepted offers over the course of the year – as men learn over time and become less overconfident, they begin to accept more low-wage offers, which works to lower the gender wage gap. The eventual goal is to estimate the model and conduct various counterfactuals.