[BU Today] Tolerance for Risk May Contribute to Gender Pay Gap

January 28, 2022

BU Today recently published insight featuring Patricia Cortes, Associate Professor in Markets, Public Policy, and Law, on her co-authored research findings pertaining to the gender wage gap in Greater Boston.

“Men tend to be more overconfident. Overconfidence means you think you’re better than you really are. If you’re risk-averse, you don’t want the risk of ending up with no job, so you have a lower reservation wage, a [minimum acceptable] wage you have in your head. If you think you’re really good, your reservation wage is higher”

Patricia Cortes
Associate Professor in Markets, Public Policy, & Law

The article discusses the less-than-obvious factors Patricia and her co-authors found in closing the wage gap, highlighting that risk aversion in women and overconfidence in men sometimes cause it to widen or narrow. Patricia and her co-authors found that higher levels of risk aversion led women to accept jobs earlier, whereas men tend to hold out longer for a better offer, which in some cases be counterproductive. A study done by Patricia and her colleagues surveying 2,000 BU Questrom School of Business alumni and undergraduates showed that women and men who accepted job offers later had a narrower pay gap than peers who accepted jobs earlier.