1. Hormones and the gender earnings gap Anne C. GielenJessica HolmesCaitlin Myers Erasmus University Rotterdam and IZA Middlebury College and IZA

2. Why are there gender differences in labor market outcomes?  Employment segregation  Differences in human capital accumulation  Discrimination Blau and co-authors (overview in Blau, “Gender, Inequality, and Wages”, OUP, 2012) Traditional explanations:

3. Why are there gender differences in labor market outcomes? Recent explanations: Differences in psychological attributes:  Attributes towards competition, negotiation, risk  Social preferences Croson and Gneezy (2009), Bertrand (2010), Dohment et al. (2011) Differences in biological influences:  Brain structure  Hormones Bertrand (2011)

4. Is there a biological basis for gender differences in preferences and personality? Testosterone is the principle androgen responsible for the development of sexually dimorphic physical characteristics in the male fetus, including those of the brain. “Brain organization theory” (Jordan-Young, 2010) posits that prenatal exposure to testosterone causes sexual differentiation of the brain, organizing the brain so that it is permanently predisposed to masculine or feminine patterns of desire, personality, and temperament.

5. Circulating testosterone and behavior Men with high circulating levels of testosterone have been found to be more:  agressive and competitive (Carre and McCormick, 2008)  risk-loving (Coates and Herbert, 2008)  entrepreneurial (White et al., 2006)

6. Prenatal exposure to testosterone and behavior Mothers with high serum levels of testosterone while pregnant have been found to have offspring who display  more masculine play and social behavior as preescoolers (Hines et al., 2002; Baron-Cohen et al., 2004)  greater spatial abilities (Baron-Cohen et al., 2004)

7. Prenatal exposure to testosterone and behavior A lower second-to-fourth digit (2D:4D) ratio, a common marker for greater prenatal exposure to testosterone, has been linked to  increased aggression (Hampson et al., 2002)  greater financial risk-taking (Dreber and Hoffman, 2007 and 2010; Garbarino et al, 2011)  greater profitability in financial trades and longer careers in finance (Coats et al., 2009)

8. Twinning as a plausible natural experiment Among litter-bearing mammals, females who develop adjacent to male litter-mates exhibit more masculine physiology and behaviors than those who do not (Vom Saal, 1989; Ryan and Vandenburgh, 2002)

9. Twinning as a plausible natural experiment This phenomenon likely applies to humans as well. (Boklage, 1985; Baron-Cohen, 2004) Females from opposite-sex twin pairs exhibit more typically masculine physiological traits:  Cranio-facial phenotype (Boklage, 1985)  Brain structure (Cohen-Bendahan et al., 2004)  Auditory systems (McFadden, 1993)  Higher birth weight (Glinianaia et al., 1998)  Greater visual acuity (Miller, 1994)  Larger tooth size (Dempsey et al., 1999)  Lower 2D:4D ratios (van Anders et al., 2006; Voracek and Dressler, 2007)

10. Twinning as a plausible natural experiment Female opposite-sex twins also have been found to exhibit more masculine sexually-dimorphic behavioral and cognitive characteristics including  improved spatial abilities (Vuoksimaa et al., 2010; Heil et al., 2011)  less expressive vocabulary (Galsworthy et al., 2000; Van Hulle et al., 2004)  greater levels of agression (Cohen-Bendahan et al., 2005)  and sensation seeking (Resnick et al., 1993; Slutske et al., 2011) compared to females from same-sex twin pairs.

11. Twinning as a plausible natural experiment Similarly, also male same-sex twins may have greater prenatal testosterone exposure. They have been found to exhibit masculinization of  brain volume (Pepper et al., 2009)  eating behavior (Culbert et al., 2008)  and vocabulary (Galsworthy et al., 2000; van Hulle et al., 2004) compared to males from opposite-sex twin pairs.

12. Research design Natural experiment: individual with male twin has higher prenatal exposure to testosterone than individual with female twin. Identifying assumptions: 1.Testosterone transfers from a male fetus to his twin 2.Gender of twin pairs is randomly assigned 3.Gender of twin sibling does not influence labor market outcomes via any mechanism other than testosterone transfer

13. Data Municipal Population Parent-Child Database (1995-2010) 14,602,884 individuals with father and/or mother ID-number Municipal Population Dataset (1995-2010) Demographics (birthdate, marital status, number of children, race, place of residence) Income tax files (2009) Annual income, hours worked, firm size, industry Sample: twins and singletons with closely-spaced siblings born between 1959 and 1979 (aged 30-50 in 2009).

14. Estimation Double-difference estimate of the effect of the effect of opposite-sex twinning on earnings using a sample of twins and singletons with closely-spaced siblings:

15. Conclusion The idea that men and women are biologically “wired” by prenatal exposure to testosterone to think and act differently has been prominent in recent discussions and controversies over women in math and science, sex disparities in wages, and trading behavior in the recent financial crisis. Our study  Identifies a plausible experiment for a moderate “shock” to prenatal exposure to testosterone.  Men with a male twin brother are found to have higher earnings; this effect is absent for women.  Gender differential may in part be explained by an earnings premium that men receive for characteristics associated with prenatal testosterone exposure.  However, results do not suggest that women would receive similar premiums for behaving in a more typically masculine fashion.