Labor Market Segmentation and the Gender Wage Gap in Ukraine

Ukrainian women are on average much more educated than women in developing countries and they also tend to show higher participation rates, albeit smaller than men's. They are also at least as educated as Ukrainian men. Women and men with identical characteristics might show different patterns of participation to informality. This result reflects in different probabilities of women and men to move across states between the two periods under exam. This emerges clearly from the analysis of the transition matrices. Both men and women show higher propensity to go to the formal sector from the informal one than vice versa. However, contrary to what is predicted by segmented labor market theories we find a higher concentration of women in the informal sector. On average, Ukrainian women do earn less than men and this is true both in the formal and in the informal sector. However, when we decompose the gender earnings differential we find evidence of two very different patterns between the formal and the informal sectors. In the formal sector, the earnings differential is entirely due to the unexplained component, usually indicated as an indicator of wage discrimination. In the informal sector, on the contrary, when the earnings differential is significantly different from zero, it is entirely due to differences in the explained component (personal, household and job characteristics). Overall, these results can be interpreted as the evidence that the Ukrainian labor market is indeed segmented and that women suffer some sort of discrimination. This discrimination is not taking place through the segregation of women in the informal sector but, more likely, through different remuneration of characteristics in the formals sector and different career opportunities and the exclusion of women from the better remunerated jobs at the top of the hierarchy. This might also explain why women in the upper tier of the wage distribution experience higher earnings when they are self-employed compared than when they are salaried, both in the formal and in the informal sector.