What firms do: gender inequality in linked employer-employee data

We study the extent to which employer heterogeneity affects gender gaps in earnings across the distribution, over time, and over the life cycle, accounting for cohort effects. Using a linked employer-employee dataset for Italy, we show that the gender gap in firm pay premia explains 34 percent of the mean gender pay gap, mainly due to between-firm components. Within-firm differences are more important at the top of the distribution, and have become more relevant over time. Gender differences in mobility towards firms with higher pay premia and larger within-firm gender inequality partly explain the gender gap in firm pay premia.