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Board Gender Diversity and Within-Firm Wage Inequity: Evidence from the Relaxation of China’s One-Child Policy

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Abstract

This study examines whether and how board gender diversity can affect corporate wage inequity by drawing on diversity theory and gender socialization and ethicality theories. Building on an exogenous relaxation of China’s one-child policy (OCP) in 2013, which led to a substantial decline in the female labor force participation rate. Our empirical analysis suggests that board gender diversity is negatively associated with corporate wage inequity. This result is robust to various endogeneity and sensitivity analyses. We find that the OCP relaxation only increases average executive pay; it does not affect employee pay. One potential mechanism driving our results is that the decline in board gender diversity caused by the OCP relaxation reduces supervision, restriction, and fairness within the firm, which increases executives’ pursuit of personal interests and ultimately leads to the rise of wage inequity. Our findings are particularly significant for firms in capital-intensive industries, firms with a low level of employee bargaining power, and large firms.

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Notes

  1. The OCP allowed city dwellers to have just one child and farmers up to two if the first was a girl. As a result, China’s population became more tilted towards men than that of many other countries.

  2. Before late 2013, only couples in which both partners were an only child could have two children (Agarwal et al., 2019; Wu, 2022).

  3. The second child birth rate data are missing for 2010 and the years after 2015, so we use the evolution of the second child birth rate for different age groups in China from 2011 to 2015.

  4. The standalone terms (i.e., Female_Ratio and Post) are subsumed by the fixed effects in our specification.

  5. It is worth noting that the divergence in the wage ratio could come from the leave taken by female board members (who receive lower wages than male board members) or decreases in female employees’ salaries due to the lack of female leaders in the company. However, our results in column (4) of Table 5 indicate that our results are less likely to be driven by the gender pay gap between female and male board members. In addition, our results in panel A of Table 7 indicate that the OCP relaxation increases the average executive pay and does not affect employee pay, thus leading to an increase in the wage inequity. Therefore, our results are not significantly caused by the decrease in female employees’ salaries due to the lack of female leaders in the company. We thank the editor for raising this important point.

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Acknowledgements

We thank Hao Liang (the editor), two reviewers, Yawen Cheng, Shasha Liu, Wenfeng Wu, Naide Ye, and seminar participants at Wuhan University, Shanghai University of Finance and Economics, University of International Business and Economics for helpful suggestions. We also gratefully acknowledge the financial support of the National Natural Science Foundation of China (Grant No. 72202078; 71991473), the Humanities and Social Science Fund of Ministry of Education of China (Grant No. 22YJC790097), the National Social Science Foundation of China (Grant No. 22VRC145), Huazhong University of Science and Technology Double First-Class Funds for Humanities and Social Sciences, and the Innovation and Talent Base for Digital Technology and Finance (B21038). All authors contribute equally to this paper. All errors are our own.

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Authors and Affiliations

  1. School of Economics, Huazhong University of Science and Technology, Wuhan, China

    Ni Qin, Dongmin Kong & Mengxu **ong

  2. School of Management, Huazhong University of Science and Technology, Wuhan, China

    Ling Zhu

  3. School of Finance, Zhongnan Univerisity of Economics and Law, Wuhan, China

    Dongmin Kong

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  1. Ni Qin
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Appendix

Appendix

See Tables 9, 10, and 11.

Table 9 Variable definition
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Table 10 Female employee ratio by industry
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Table 11 Balance tests of PSM
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Qin, N., Kong, D., Zhu, L. et al. Board Gender Diversity and Within-Firm Wage Inequity: Evidence from the Relaxation of China’s One-Child Policy. J Bus Ethics (2024). https://doi.org/10.1007/s10551-024-05676-1

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