The Trait That Explains 10 Percent of the Gender Pay Gap

The gender pay gap is nowhere more conspicuous than at the top of the corporate ladder. In 2014, women represented only 6.5 percent of the best-paid chief executives, and earned nearly 10 percent less than their male counterparts.

There are many explanations, including the attitude to career gaps, the challenge of juggling work with family life, and sexism. But what about the difference in the appetite for competition between the genders?

The “well-documented gender difference in taste for competition” may not be the main factor explaining the gender pay gap, but it does account for one-tenth of the differential, according to Ernesto Reuben of Columbia, Paola Sapienza of Northwestern, and Chicago Booth’s Luigi Zingales. Men are more competitive, self-select into industries that are more competitive, and are therefore more highly compensated, the researchers find.

Reuben, Sapienza, and Zingales draw this conclusion by analyzing the types of people who end up in the C-suite—MBA degree-holders. The researchers looked at a cohort of Chicago Booth MBAs in which women earned, on average, 15 percent less than their male peers upon graduation.

Using an experiment designed by Muriel Niederle of Stanford and Lise Vesterlund of the University of Pittsburgh, they surveyed members of a Chicago Booth cohort at the start of their degree program, giving them the opportunity to earn money by doing simple arithmetic under one of two scenarios. In the first, participants could earn $4 per correct answer; in the second, $16 per correct answer if they outperformed a group of their peers. The researchers find that the men were twice as likely as the women to choose the competitive scenario.

To check lab-measured competitiveness against real-world outcomes, Reuben, Sapienza, and Zingales ran the results of the experiment against career data collected by the school at graduation and again seven years later. They find that competitive individuals were more likely to work in higher-paying industries, and to remain in those industries.

In contrast to the effect of gender on industry selection, the effect of competitiveness develops more gradually throughout the MBA experience. “The effect of taste for competition emerges over time when MBAs and firms interact with each other,” the researchers write. For example, the students’ incoming GPA and GMAT scores weren’t correlated with taste for competition. And even the same differences in career paths couldn’t be detected prior to starting the MBA program. “There is no relation between taste for competition and industry before participants started their MBA,” they write.

Later on in their degree program, fewer female MBA students chose to work in the most-competitive industries, such as consulting, than in less-competitive industries, such as marketing—even though the less-competitive industries also exhibited a larger gender pay gap.