Targeting mediating mechanisms of social disparities with an interventional effects framework, applied to the gender pay gap in Western Germany

TL;DR

This paper discusses methods to identify and estimate mediating factors behind social disparities, specifically applying an interventional effects framework to analyze and quantify the gender pay gap in Western Germany using survey data.

Contribution

It introduces a clear distinction of approaches for causal mediation analysis and applies an interventional effects method to quantify potential reductions in the gender pay gap.

Findings

Gender pay gap could be reduced by up to 86% with equal distribution of mediators.

Aligning full-time employment and work experience significantly reduces the pay gap.

The paper demonstrates the application of interventional effects analysis to real-world social disparity data.

Abstract

The Oaxaca-Blinder decomposition is a widely used method to explain social disparities. However, assigning causal meaning to its estimated components requires strong assumptions that often lack explicit justification. This article emphasizes the importance of clearly defined estimands and their identification when targeting mediating mechanisms of social disparities. Three approaches are distinguished based on their scientific questions and assumptions: a mediation approach and two interventional approaches. The Oaxaca-Blinder decomposition and Monte Carlo simulation-based g-computation are discussed for estimation in relation to these approaches. The latter method is used in an interventional effects analysis of the observed gender pay gap in Western Germany, using data from the 2017 German Socio-Economic Panel. Ten mediators, including indicators of human capital and job characteristics, are considered. Key findings indicate that the gender pay gap in log hourly wages could be reduced by up to 86% if these mediators were equally distributed between women and men. Substantial reductions could be achieved by aligning full-time employment and work experience.