6.6 Mincerian Regression to Measure Returns, Sri Lanka

FIGURE 6.6 Mincerian Regression to Measure Returns, Sri Lanka

Source: STEP Sri lanka. Note: Only statistically significant results are reported. Full results are shown in annex 6b, table 6b.2.

sample in Sri Lanka, it is estimated that the hourly earnings of a typical man worker surpass the hourly wages of a typical woman worker by 81 percent. This gap widens (narrows) to 112 percent (25 percent) in the informal (formal) sector, indicating that the gender disparity in earnings is more pronounced in the informal sector than in the formal sector. Among the well-known causes of the gender wage gap are the social norms, the underrepresentation of women in leadership positions, the reduced working hours associated with the greater care responsibilities of women, the differences in education, and the undervaluation of the jobs held by women. However, these factors do not account for the entire gap (ILO 2019). Another reason may also be the low levels of socioemotional skills among women. In Sri Lanka, men survey respondents report higher socioemotional skills, whereas, in Pakistan, women survey respondents report greater hostility bias, agreeableness, and extroversion, while the other socioemotional skills are more prevalent among men (figure 6.7).

The results confirm that both cognitive skills and educational attainment are strong predictors of earnings.9 As measured by Raven scores, cognitive skills in Pakistan increase earnings by 2.3 percent, conditional on the observation of monthly earnings. Cognitive skills proxied by proficiency in understanding vocabulary in Sri Lanka boost hourly earnings by 259 percent and 454 percent in the overall sample and in the informal subsample, respectively, but they do not affect participants in the formal subsample.