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Inertia and Earnings gaps: Essays in Behavioral and Labor Economics

  • Author(s): Esteves-Sorenson, Constanca Medeiros
  • Advisor(s): Tadelis, Steven
  • et al.
Abstract

Abstract for first essay: Micro-costs, inertia in television viewing. Inertia, defined as the persistent choice for the default option, affects outcomes from organ donations to enrollment in retirement plans. A leading explanation for inertia is the cost of switching to an alternative option. Can consumers display inertia in a setting where this cost is negligible? If so, is this behavior systematic and significant enough to affect the profit- maximizing strategies of firms? This paper finds inertia in a setting in which the switching cost is extremely small: a click of the remote in the choice of television programs. In the absence of a significant switching cost, the audience of a program should not depend on the audience of the prior show on the same channel, controlling for the non-random assignment of programs. I find, however, that despite the negligible cost of switching: (i) male and female viewership of the news depends on whether the preceding show appealed to men or women, (ii) a 10% increase in the demand for the prior show increases the demand for the current program by 2%-4%. The leading explanation, among the several considered for this and other findings, is procrastination: consumers continuously postponing switching channels. Inertia in program choice affects channels' optimal program schedule and may influence as much as 20-40% of their profits. The broader implications of these findings are discussed.

Abstract for second essay: The gender earnings gap for physicians and its increase over time. Studies comparing earnings of male and female physicians have traditionally shown that male physicians earn more than female physicians with similar characteristics. Recent research using data from 1990 (Baker, 1996, in the New England Journal of Medicine) has suggested, however, that the gap in earnings between male and female physicians at the onset of their careers has disappeared, hailing a new era of equal gender pay. This paper analyzes four rounds of the Community Tracking Study Physician Survey from 1997 to 2005. Contrary to recent research, the evidence suggests that even at the onset of their careers male physicians earn at least 13% more than their female counterparts. Moreover, as physicians age from their thirties into their forties, the gap in pay between male and female physicians more than doubles to at least 28%, stabilizing thereafter. The difference in our findings versus those of recent research lies in the latter use of a restrictive estimation equation which leads to flawed conclusions.

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