Gender Wage Discrimination in Pakistan

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Gender Wage Discrimination in Pakistan|
Evidence from Pakistan 2008/09 and 2010/11|
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Table of Contents
Introduction2
Literature Review2
Methodology3
Variables Used – Characteristics of Workers5
Results7
Discussion7
Bibliography8
Appendix A9
Selectivity Bias Logit Regression Results:9

Introduction
This paper explores the dynamics of gender wage discrimination in Pakistan for two data sets; Labour Force Survey for the year 2008/09 and 2010/11. We will explore whether or not women are discriminated against, as it has been suggested for a predominantly Islamic country like Pakistan. Labour theory addresses many reasons for wage discrimination. For the purposes of this research we will concentrate on ‘employer wage discrimination’. Following this our research will be aimed at discovering if women are paid less than their male counter-parts especially with the same set of characteristics. For this purpose we will use the Oaxaca-Blinder method to calculate the coefficient for discrimination across genders. Literature Review

The basis of this paper is the work done by Oaxaca and Blinder in 1973 about wage discrimination models. In the paper ‘Interpreting the Decomposition of the Gender Earnings Gap’ (Giaimo R. 2007) this method has been applied to find out how different characteristics change the discriminatory behaviour of employers in Italy. Oaxaca’s method for calculating discrimination was further adapted in the paper ‘Gender Wage Discrimination at Quantiles’ (Javier Gardeazabal 2005), and was used to calculate discrimination coefficients for quintiles. In a study conducted in India (Tilak 1980), it was found that the incidence of unemployment was higher for women than for men with the same characteristics. In this study the only characteristic that was taken was education. This is a different angle to look at discrimination from what this paper will do. Rather than looking at the unemployed, this paper will see the women in the labour force and if they face discrimination with respect to their wages. However, the underlying aim and also the hypothesis formed are the same. The paper ‘Wage Differentials and Gender Discrimination: Changes in Sweden 1981-98’ (Mats Johansson 2005) explored the wage gaps between men and women in Sweden. They found that the wage gap was 14%-18% during the 1990’s. Their study also indicated that this difference could not be explained by applying the job requirements and qualifications to women’s wage function. The conclusion was that there is undoubtedly some other factors other than the characteristics of the workers that determined the wages in the Labour Market. Methodology

This paper calculated a coefficient for Gender Wage Discrimination from the Oaxaca-Blinder decomposition.

D= Xfβm-Bf+ βm(Xm-Xf)

Here ‘β’ is a vector of characteristics of workers. Therefore, the first part of the equation shows the wage differential between males and females on the basis of characteristics. Second part of the equation normalizes characteristics, for females in this instance, and then subtracts the wage differential based on characteristics, to give us the overall differential based on discrimination. As a control, we also work out the converse of this Oaxaca Blinder Decomposition as follows;

D= Xmβm-Bf+ βf(Xm-Xf)

To control for selectivity bias, we have also used the ‘Heckman Procedure’. A multi-variable Logit model was run and three variables (Lambda1, Lambda 2 and Lambda3) were calculated to act as control for variables missed in our model. This discrimination coefficient has been calculated for two data sets using characteristics such as age, marital status, education level, province, region, professional trainings and status in the family. These characteristics have been selected after being shown significant as the determinant of wage. Natural log of wages was the dependant variable in the following regression;

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