Institutions, Markets and Men's and Women's Wage Inequality: Evidence from Ukraine

Ina Ganguli and Katherine Terrell

No 1724, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Ukraine, the second largest country in the former Soviet bloc, is facing the challenge of rallying popular support for major structural reforms. As in most developing economies, the "Orange Revolution" government's success will depend on its ability to keep income distribution within an acceptable range. This paper is the first to make use of recent methodological developments in Lemieux's (2002) decomposition method to advance our understanding of the determinants of wage inequality in developing and transition economies. With an eye toward future policy, we apply this approach to the first large longitudinal micro data set for Ukraine – the Ukrainian Longitudinal Monitoring Survey (ULMS) – to determine the extent to which the introduction of markets and new institutions affected men's and women's wage inequality between 1986 and 2003. We find that wage inequality rises substantially for both men and women. Applying the Lemieux method, we show that market forces drive the increase in inequality through changes in wage premiums, but the changes in the composition of the labor force (selection) generally contribute to a reduction in wage inequality; the exception is that changes in women's labor composition contribute to an increase in inequality in the top half of their wage distribution. Finally, changes in unobservable characteristics work toward increasing inequality for both men and women. The institution of the minimum wage plays an important role in lowering the growth in inequality, more for women than for men. Going forward, if the government wants to ameliorate the effects of market forces on wage inequality, it should recognize the importance of maintaining the value of, and compliance with, the minimum wage.

Keywords: transition; semi-parametric estimation; inequality; gender; Ukraine; wages (search for similar items in EconPapers)
JEL-codes: C14 I2 J16 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2005-08
New Economics Papers: this item is included in nep-cis, nep-cwa, nep-lab, nep-ltv and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published - published in: Journal of Comparative Economics, 2006, 34 (2), 200-227

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Journal Article: Institutions, markets and men's and women's wage inequality: Evidence from Ukraine (2006)
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