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Earnings and Social Background: An evaluation of caste/ethnic wage differentials in the Nepalese labor market

Author

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  • Mainali, R. M.
  • Jafarey, S.
  • Montes-Rojas, G.

Abstract

This paper examines the sources of wage differentials among caste/ethnic groups, employing national survey data from Nepal. Our study shows that, in countries such as Nepal which have imperfect labour markets, the conventional Oaxaca decomposition methodology fails to estimate precisely the source of wage differential. Using an extended model, occupational choice, firm size distribution and the interaction between these two are employed along with the conventionally used measures of human capital endowments of different groups, to estimate these effects. Our results indicate that the lack of access to better paying occupations and larger firms, rather than differences in human capital, are the main factors underlying the caste/ethnic wage differentia in Nepal. Furthermore, empirical evidence is not found in favour of government policy of "affirmative action" to contribute yet in narrowing down the caste/ethnic wage differential in the labour market.

Suggested Citation

  • Mainali, R. M. & Jafarey, S. & Montes-Rojas, G., 2013. "Earnings and Social Background: An evaluation of caste/ethnic wage differentials in the Nepalese labor market," Working Papers 13/01, Department of Economics, City University London.
    • Handle: RePEc:cty:dpaper:13/01
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    References listed on IDEAS

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    Cited by:

    1. Pathak, Prakash & Schündeln, Matthias, 2022. "Social hierarchies and the allocation of development aid: Evidence from the 2015 earthquake in Nepal," Journal of Public Economics, Elsevier, vol. 209(C).

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    Keywords

    Labour Market Discrimination; Caste; Ethnicity;
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