Myth or fact? The beauty premium across the wage distribution in Germany

- The male beauty premium is present throughout the wage distribution.
- The female beauty premium is concentrated at the bottom of the wage distribution.
- The male and female beauty premia are high for those with college education.
- There is a beauty penalty for women with low education.
- Beautiful people also have other characteristics which increase their wage.

We allow for differential effects of physical appearance across the wage distribution using a technique traditionally used in the finance literature. We find an average beauty premium of 2%-4% for women, which is concentrated at the bottom of the wage distribution. The average beauty premium for men is larger at 5%-7% and is present throughout the wage distribution. Both of these vary by education level. We find that differences in characteristics (such as age, family composition, labor market attributes, etc.) between beautiful and plain people contribute to the beauty premium identified using traditional regression models. Isolating this characteristic effect from the unexplained effect using decomposition techniques leads to smaller beauty premia.