Introduction
This paper explores the gender pay gap among Italian university graduates in the early years after
labour market entry. Our data come from the Survey on Labour Market Transitions of University
Graduates carried out in 2007 by the Italian National Statistical Office. By estimating the earnings
equation for male and female employees working in full-time status we find a gender pay gap of
11%2. By using the standard Oaxaca-Blinder decomposition, and controlling for possible self-
selection (two-stage Heckman procedure), we separate earnings differences due to differences in
observed characteristics, usually referred to as “explained gender pay gap” (near to 12% in our data)
from differences in returns to characteristics, usually referred to as “unexplained or residual gender
pay gap” (near to 88% in our data).
This finding is neither surprising nor trivial.
The difference in pay per se is not surprising because in modern labour market imperfect
information manifests itself by the existence of wage dispersion. If both the labour demand and
supply are heterogeneous, wages are not uniform, but instead vary across demographic groups. The
literature shows that when examining how earnings are distributed by sex we find that women earn
less than men, and no matter how extensively regressions control for individual and company
characteristics, an unexplained gender pay gap remains even among workers with almost no
experience3. If the unexplained pay disparity sometimes favoured women and sometimes favoured
men, there would be no reason for concern. But systematically and without exception finding that
women earn less than men raises some non trivial questions (Hersch 2006). What unobserved
something is it that can’t be measured, is correlated with sex, and explains more of a pay disparity
that known determinants of earnings such as education and work experience? Following Becker
2 In the definition currently used by Eurostat the Gender Pay Gap (in unadjusted form) represents the difference
between average gross hourly earnings of male paid employees and of female paid employees as a percentage of
average gross hourly earnings of male paid employees (Eurostat 2009). The latest Eurostat data (2008) show that the
gender pay gap is estimated to be 18% in the EU as a whole, and has practically remained constant during the last 15
years. The so-called unadjusted measure of the gender pay gap used in European statistics captures the overall or
raw gap in men’s and women’s hourly wages. Adjustment for observable characteristics reduces the gender pay gap
but does not eliminate it and large differences remain. Using the European Community Household Panel Survey, the
adjusted gender pay gap only accounts for less than half of the overall gap (EuroFound 2010).
3 For example, controlling for education, experience, personal characteristics, city and region, occupation, industry,
government employment, and part-time status, Altonji and Blank (1999) find that only about 27 percent of the
gender wage gap is explained by differences in characteristics.