ABSTRACT
Pay inequality between women and men for market work continues to be a well-documented central characteristic of the market economy. This chapter focuses on different and more realistic behavioral assumptions than those that underlie the standard economic theories of discrimination. Its basic proposition is simple: once discrimination leads women to be paid less than men, women become less productive than men. Discrimination in the labor market has been interpreted as the payment of different wage rates to equally productive individuals. Pay inequality is eliminated when the nondiscriminating employer expands plant size or as more nondiscriminating employers enter into the relevant industries to take advantage of relatively inexpensive female labor. A basic premise of the behavioral model and of x-efficiency theory per se is that wage rates can affect productivity through the intermediary of firm organization by affecting effort intensity.
