6.5 Heckman Selection Model, Pakistan

FIGURE 6.5 Heckman Selection Model, Pakistan

Source: Pakistan labor Skill Survey. Note: Only statistically significant results are reported. Full results are shown in annex 6b, table 6b.1.

stability, decision-making, and extroversion have a positive impact on earnings (annex 6B, table 6B.2). The results on the formal sector are consistent with Nyhus and Pons (2005), who find a close association between emotional stability and wages, while decision-making has a positive impact on earnings because of its association with the degree of control and leadership, which enables one to persuade others. Nyhus and Pons also argue that the impact of extroversion depends on the occupation. Extroversion may be beneficial among individuals in people-facing jobs, such as sales representatives or teachers, but not among scientists or accountants. The results on the formal sector in Sri Lanka are similar to the results on Bangladesh, where individuals in the formal sector with greater perseverance and emotional stability earn a starting salary that is 1.8 percent to 2.5 percent higher than that of individuals with fewer of these skills (Hilger, Nordman, and Sarr 2018).

The substantial gender gaps in earnings in Pakistan and Sri Lanka may be related to differences in socioemotional skills. In Pakistan, the monthly earnings of men workers are estimated at 109 percent of the monthly earnings of women workers, on average, conditional on observation of the earnings.8 However, such a substantial gender gap in earnings may be biased because of the hugely skewed gender distribution in the subsample of observed wages, 93 percent of which is accounted for by men. In the overall