Gender wage inequality during Sri Lanka’s post-reform growth: A distributional analysis

Abstract

Abstract This paper investigates gender wage inequality in Sri Lanka during 1992–2014, a period of robust economic growth following pro-market reforms. The gap in mean wages between men and women decreased steadily over this period. Unconditional quantile regression reveals the decline in gender wage inequality was driven by the upper half of the distribution, and was due to improvements in women’s observable human capital. Yet, the pay structure became more unequal, indicating widening gender gaps in the returns to labor market characteristics and in unobservable determinants of wages. The gender gap in pay structure widened disproportionately in the lower half of the distribution, coinciding with falling absolute and relative returns to women in manufacturing industries and production occupations facing greater international competition. The study also demonstrates selection bias underestimates the gender wage gap and overestimates the gains in equality over time. Factors that hinder gender equality in the labor market are discussed along with policy implications.