# _Male-female wage gaps_

Although there is evidence that male-female earnings gaps have declined in recent years (UNIFEM, 2005; Duryea et al. 1999), women in developing countries earn on average only 73 percent as much as men (World Bank, 2001).<sup>12</sup> How can these gaps be explained?

The traditional explanation is that observed gender wage gaps can be partially explained by differential endowments of human capital (although this explanation is difficult to sustain in regions such as Latin America and the Caribbean, where women’s educational attainment now exceeds that of men) and is partially unexplained. This unexplained component is frequently attributed to discrimination, although it may also be due to unobserved heterogeneity. The Oaxaca-Blinder decomposition has been used to quantify the size of these two components in a vast number of national case studies. In the example in the preceding paragraph, of the 27 percent difference in hourly earnings between men and women in a set of 42 developing countries, more than 80 percent cannot be explained by differences in the levels of human capital between men and women.

Occupational segregation has been proposed as a candidate to explain persistent wage gaps, but when it has been included in extended Oaxaca-Blinder-type decompositions, it typically explains a very low percentage of observed gaps (Fluckinger and Silber, 1999). Occupational segregation is clearly a more important issue in middle-income developing countries, since in low-income countries the majority of men and women alike are engaged in subsistence agriculture.

Overall wage structure matters as well. Evidence suggests that national wage distributions characterized by wide variation in wages are associated with larger gender wage gaps (Blau and Kahn, 1996 and 2001).

# _Women’s labor supply as a buffer to macro shocks_

Women’s ability to supply labor acts as a critical “buffer” for households. Poor households have to prevent and mitigate risk (i.e., reduce the risk of negative income shocks through measures such as crop diversification, migration to locations with more remunerative and secure employment opportunities, and savings) and cope with the adverse effects of negative income shocks (by, e.g., drawing down savings, distress sales of physical assets, utilizing formal and informal sources of credit for consumption, and accessing social networks). Of all these available strategies, the ability to increase labor supply is the most critical for poor households, given that they tend to have low savings, own few physical assets, and are credit-constrained.

> 12 These are hourly earnings gaps.  Wage gaps per se have little meaning in economies where wage employment is unimportant.  Even if wage gaps are recast as hourly earnings gaps, this is of little help in family enterprises, where neither the differential productivity of family members nor the distribution of profits across individuals is directly observed (Mammen and Paxson, 2000). In countries where the overwhelming majority of workers are engaged in small scale family or subsistence farming, earnings gaps may not be a useful indicator.  This conclusion must be nuanced for those cases in which men and women farm different plots and for which it is consequently feasible to measure gender-disaggregated productivity and earnings.

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