Wage Gap in an Ethnically Segmented Labor Market: The Role of Cognitive Skills

Svetlana Ridala and Ott Toomet

Eastern European Economics, 2019, vol. 57, issue 1, 20-30

Abstract: We analyzed the ethnic wage gap in Estonia that hosts a large Russian-speaking minority population. We used the Oaxaca-Blinder decomposition to test whether the observed wage gap among the working population is related to commonly unobserved skills. Data from the Estonian Labor Force Survey and the Programme for the International Assessment of Adult Competencies (PIAAC) have been used. We find that the three PIAAC skills combination lowered the estimated unexplained wage differential by approximately 20%. We conclude that the unexplained wage gap is most likely related to entry barriers, combined with low-level segregation and segregated social networks.

Date: 2019
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DOI: 10.1080/00128775.2018.1524713

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