Closing the Gender Pay Gap in the US Federal Service: The Role of New Managers

This paper estimates the causal effect of managerial homophily (getting a same-sex manager) on employee pay in the US Federal Civil Service. Using over 30 years of detailed payroll data, we exploit the appointment of new managers in an event study design. Same-sex managers are particularly important for female employees, whose pay increases by an additional 1.5 log points relative to male counterparts. Managerial homophily operates through increases in pay grades and occupational changes. A novel finding is that these effects are heterogeneous: same-sex managers have the largest effect on employees in less routine jobs even within education levels. Far from being an artifact of a bygone age, these effects are present across the four political eras we study. We conclude that even highly regimented pay systems are not immune to discretionary managerial actions.