nep-tra New Economics Papers
on Transition Economics
Issue of 2016‒04‒23
23 papers chosen by
J. David Brown
United States Census Bureau

  1. Minimum Wage Violation In Central And Eastern Europe By Karolina Goraus; Piotr Lewandowski
  2. How Fast Can China Grow? The Middle Kingdom’s Prospects to 2030 By Jeannine Bailliu; Mark Kruger; Argyn Toktamyssov; Wheaton Welbourn
  3. Innovation, Competition and Productivity. Firm Level Evidence for Eastern Europe and Central Asia By Klaus S. Friesenbichler; Michael Peneder
  4. Regional economic impact assessment with missing input-output data: a spatial econometrics approach for Poland By Andrzej Toroj
  5. Networks of Enterprises and Innovations: Evidence from SMEs in Vietnam By Doan, Quang Hung; Vu, Hoang Nam
  6. Changes in nominal rigidities in Poland – a regime switching DSGE perspective By Baranowski, Paweł; Kuchta, Zbigniew
  7. European Green Tech FDI in China: The Role of Culture By Katiuscia Vaccarini; Francesca Spigarelli; Ernesto Tavoletti
  8. Provocări în perioada tranziției la economia de piață în România. Creșterea gradului de îndatorare externă și internă By Zaman, Gheorghe; Georgescu, George
  9. Chinese Households’ Recycling Behavior – Analysis of Resident Survey in Harbin, China By Zhujie Chu; Laura Meriluoto; Ying Li; Bolin Chen
  10. International technology transfer and domestic innovation: evidence from the high-speed rail sector in China By Yatang Lin; Yu Qin; Zhuan Xie
  11. Employment and Starting Wages of New Graduates in China: Using the latest available survey data By LIU Yang
  12. Rising Wages, Yuan Appreciation and China’s Processing Exports By Yuqing Xing
  13. Family Size and the Demand for Sex Selection: Evidence From China By Samuel Marden
  14. Effects of fiscal consolidation on exports in Ukraine By Vdovychenko, Artem; Zubrytskyi, Artur
  15. How to Make The Fiscal policies Greener in China?——Based on The Perspective of Environmental Macroeconomics By Lu, Hongyou; Xu, Wenli; Xu, Kun
  16. Who Walks in the Shadows? Revealing the Blind Spots of the Natural Forest Protection Programme in China By Liu Zhaoyang
  17. Stability of complementarity between Japanese FDI and import of intermediate goods : agglomeration effects and parent-firm heterogeneity By Ito, Tadashi; Matsuura, Toshiyuki; Yang, Chih-Hai
  18. The environment dimension of food supply chain analysis By Lei, Lei
  20. The Internationalization of the Renminbi By Ronald W. Anderson
  21. Cost-Benefit Analysis of Climate-Resilient Housing in Central Vietnam By Tran Tuan Anh
  22. Inter- and intra-farm land fragmentation in Viet Nam By Thomas Markussen; Finn Tarp; Do Huy Thiep; Nguyen Do Anh Tuan
  23. When do gender wage differences emerge ? a study of Azerbaijan's labor market By Pastore,Francesco; Sattar,Sarosh; Sinha,Nistha; Tiongson,Erwin H. R.

  1. By: Karolina Goraus; Piotr Lewandowski
    Abstract: Minimum wages continue to be at the centre of the policy debates in both developed and emerging economies. Such policies can only be effective if (1) the existing regulatory system does not have gaps that allow for the payment of wages below the minimum wage, and (2) the existing minimum wage laws are not violated (too often). In this paper we analyse minimum wage violations in 10 Central and Eastern European countries that have joined the EU since 2004, and that have statutory national minimum wages. Utilising EU-SILC data, we use the methodology proposed by Bhorat et al. (2013) to analyse both the incidence of minimum wage violations, as well as the monetary depth of these violations. We find that on average in 2003-2012, the estimated incidence of violations ranged from 1.0% in Bulgaria, to 1.3% in the Czech Republic, around 3% in Romania and Slovenia, 4.7% in Poland and Hungary, 5.6% in Latvia, and 6.9% in Lithuania. The average pay shortfall ranged from 13.7% of the country-year specific minimum wage in Estonia, to 41.7% in Slovenia. In all of these countries, workers who were female, less-educated, in the service or agricultural sector, in a micro firm, or with a temporary contract were more likely than other categories of workers to earn less than the minimum wage they were entitled to. While higher minimum to median wage ratios were associated with higher levels of non-compliance, this effect was present within countries over time, but not between them.
    Keywords: minimum wage, violation, compliance, Central Eastern Europe
    JEL: J08 J31 J38
    Date: 2016–04
  2. By: Jeannine Bailliu; Mark Kruger; Argyn Toktamyssov; Wheaton Welbourn
    Abstract: Given its size and importance for global commodity markets, the question of how fast the Chinese economy can grow over the medium term is an important one. This paper addresses this question by examining the evolution of the supply side of the Chinese economy over history and projecting how it will evolve over the next 15 years. Using a Cobb-Douglas production function, we decompose the growth of trend GDP into those of the capital stock, labour, human capital and total factor productivity (TFP) and then forecast trend output growth out to 2030 using a bottom-up approach based on forecasts that we build for each one of these factors. Our paper distinguishes itself from existing work in that we construct a forecast of Chinese TFP growth based on the aggregation of forecasts of its key determinants. Moreover, our analysis is based on a carefully constructed estimate of the Chinese productive capital stock and a measure of human capital – based on Chinese wage survey data – that better reflects the returns to education in China. Our results suggest that Chinese trend output growth will decelerate from around 7% currently to about 5% by 2030, and are consistent with a gradual rebalancing of the Chinese economy characterized by a decline in the investment rate.
    Keywords: Development economics, International topics, Potential output, Productivity
    JEL: E32 E22 E23
    Date: 2016
  3. By: Klaus S. Friesenbichler (WIFO); Michael Peneder (WIFO)
    Abstract: We investigate the drivers of firm level productivity in catching-up economies by jointly estimating its relationship to innovation and competition using data from the EBRD-WB Business Environment and Enterprise Performance Survey (BEEPS) in Eastern Europe and Central Asia. The findings confirm an inverted-U shaped impact of competition on R&D. Both competition and innovation have a simultaneous positive effect on labour productivity in terms of either sales or value added per employee, as does a high share of university graduates and foreign ownership. Further positive impacts come from firm size, exports, or population density. Innovation and foreign ownership appear to be the strongest drivers of multifactor productivity.
    Keywords: innovation, competition, productivity, development, transition economies, simultaneous system
    Date: 2016–04–13
  4. By: Andrzej Toroj
    Abstract: We propose a novel method of constructing multisector-multiregion input-output tables, based on the standard multisector tables and the tools of spatial econometrics. Voivodship-level (NUTS-2) and subregion-level data (NUTS-3) on sectoral value added is used to fit a spatial model, based on a modication of the Durbin model. The structural coefficients are calibrated, based on I-O multipliers, while the spatial weight matrices are estimated as parsimoniously parametrised functions of physical distance and limited supply in certain regions. We incorporate additional restrictions to derive proportions in which every cross-sectoral ow should be interpolated into cross-regional ow matrix. All calculations are based on publicly available data. The method is illustrated with an example of regional economic impact assessment for a generic construction company located in Eastern Poland.
    Keywords: input-output model, spatial econometrics, Durbin model, multiregion analysis, regional economic impact assessment
    JEL: C21 C31 C67 D57 R12 R15
    Date: 2016–03
  5. By: Doan, Quang Hung; Vu, Hoang Nam
    Abstract: By using the latest dataset from the survey of SMEs conducted in Vietnam in 2011, we show that a firm both participating in a wider network of input suppliers, buyers, and associations of enterprises and conducting innovative activities in production has higher labor productivity than others, implying that networks of enterprises and innovation are complementary to each other in affecting performance of SMEs in Vietnam. We also find that supports of the government including providing better infrastructure to the SMEs and helping the SMEs to be formalized when being established are conducive to the development of the SMEs in Vietnam.
    Keywords: Complementary, supermodularity, Network, Innovation, SMEs.
    JEL: D58 O3
    Date: 2016–01
  6. By: Baranowski, Paweł; Kuchta, Zbigniew
    Abstract: We estimate a dynamic stochastic general equilibrium model that allows for regimes Markov switching (MS-DSGE). Existing MS-DSGE papers for the United States focus on changes in monetary policy or shocks volatility, contributing the debate on the Great Moderation and/or Volcker disinflation. However, Poland which here serves as an example of a transition country, faced a wider range of structural changes, including long disinflation, EU accession or tax changes. The model identifies high and low rigidity regimes, with the timing consistent with menu cost explanation of nominal rigidities. Estimated timing of the regimes captures the European Union accession and indirect tax changes. The Bayesian model comparison results suggest that model with switching in both analyzed rigidities is strongly favored by the data in comparison with switching only in prices or in wages. Moreover, we find significant evidence in support of independent Markov chains.
    Keywords: nominal rigidities, Markov-switching DSGE models, Bayesian model comparison, regime switching
    JEL: C11 E31 E32 J30 P22
    Date: 2015–12
  7. By: Katiuscia Vaccarini (University of Macerata); Francesca Spigarelli (University of Macerata); Ernesto Tavoletti
    Abstract: The purpose of this paper is to investigate to what extent culture and language affect European foreign direct investments (FDI) in mainland-China. It provides an in-depth analysis on the perception of European and Chinese identity and the role played by language in fostering or hampering FDI, along with culture. Design/methodology/approach: our research questions are contextualized and timely/spacely bound through a multiple case study panel of six European companies, which entered the Chinese green tech market through FDI. We used quantitative and qualitative approaches and a three-phase data collection process, based on a specific protocol. Findings: findings suggest that European investors emphasize "intra-Europe" differences rather than a "European collective (id)entity". They have more awareness of the intra-China differences in the post-entry rather than the pre-entry period. The cultural factor goes along with the language dimension, which, in specific cases, is perceived as a higher hurdle than culture. However, by adopting a cognitive and social psychological viewpoint, language and culture are not stand-alone dimensions and intersect with each other. They both contribute to the concept of identity. Research limitation/implication: the analytical generalisation out of our multiple case study is limited to a specific industry and to specific home and target economic areas. Practical implications: our research offers an in-depth insight about the role and the perception of culture of European companies investing in China mainland. This study is not only addressed to academics and scholars, but also to managers who want to approach the market and policy makers.
    Keywords: green tech FDI, Europe, China, cultural distance, psychic distance
    Date: 2016–01
  8. By: Zaman, Gheorghe; Georgescu, George
    Abstract: Under the circumstances of the globally interconnected world, facing currently with growing uncertainties and capital flows volatility, the assessment of external and internal indebtedness of a country could be crucial for designing better policies in order to stimulate recovery and sustainable economic growth. The paper focuses on the analysis of the main causes of the accelerated increase in Romania’s external and internal debt during the transition period, enhanced by the effects of the global financial crisis, which were neither anticipated nor countered. It was found out that, in terms of international debt sustainability standards, adjusted for Romania, the country has reached an excessive indebtedness degree in the post-crisis years, along with the deterioration of the macroeconomic situation. Among the main conclusions of the paper, strong efforts targeting coherent macroeconomic policies aimed, as central objectives, at raising the potential output growth and the resilience to shocks from the external environment have been underlined, toward the recovery of Romania’s financial position and ensuring the external and internal debt sustainability.
    Keywords: internal and external debt; debt sustainability; financial crisis; debt threshold; systemic risk
    JEL: B22 E44 E62 F34 H63
    Date: 2016–02–19
  9. By: Zhujie Chu; Laura Meriluoto (University of Canterbury); Ying Li; Bolin Chen
    Abstract: China’s rapid rates of urbanization and income growth have led to skyrocketing of the accumulation of domestic solid waste in landfills. Various policies have been adopted by the municipal governments, including the city of Harbin, to improve incentives for recycling in an attempt to reduce solid waste accumulation, but the effects of these efforts appear to have been mixed. The aim of this paper is to gain further understanding of the factors that influence households’ recycling behavior. We administered a survey to residents of Harbin city to measure their recycling frequency as well as their understanding of and attitudes towards household solid waste management. We apply ordered logistic regression analysis to study the impact of the survey variables and socioeconomic factors on the frequency of recycling. We find that knowledge, attitudes about sorting and reuse, attitudes about government involvement in recycling programs, and understanding of the environmental effects of recycling have positive effects on recycling frequency. Education plays a significant positive role while gender, income and age play no significant role in recycling frequency.
    Keywords: Solid waste; recycling; survey; peer pressure; China
    Date: 2016–04–14
  10. By: Yatang Lin; Yu Qin; Zhuan Xie
    Abstract: How does the transfer of advanced technology spur innovation in developing countries? This paper exploits the large-scale introduction of high-speed railway (HSR) technology into China in 2004 as a natural experiment to address this question. The experiment is unique in the sense that this wave of technology transfer is large, abrupt and arguably exogenous in timing, covering a variety of technology classes and a large number of geographically-dispersed railway-related firms. With detailed information on the types of technology transferred and the identities of the receiving firms, as well as their product market specializations, we are able to depict a clear picture of how foreign technology is digested and spurs follow up innovation in and out of directly receiving firms. Our findings suggest that technology transfer leads to significant growth in HSR-related patents in cities with direct receivers of imported technology after 2004 in a triple-difference estimation. We also observe sizable spill overs to firms that are not directly related to the railway industry. Technology similarity plays an important role in technology diffusion, but we do not observe any significant impacts of geographic proximity. Previous university research strength in relevant fields is also conducive to stronger technology spill overs.
    Keywords: Innovation; foreign technology transfer; knowledge spill over; China
    JEL: J1
    Date: 2015–12
  11. By: LIU Yang
    Abstract: We examined the determinants of labor market outcomes of new graduates in China based on an original survey. Data were collected in recent years following the new reform of the household registration system ( hukou in the literature). We found that search effort, measured by the number of job applications sent by graduates, has a significant positive effect on employment. Furthermore, parents' income contributes significantly to starting wage, but has no significant effect on finding a job. This could be because parents' income is considered a major unemployment benefit for new graduates, theoretically contributing to wages but not affecting job-labor match. Moreover, contrary to previous studies using data before the new hukou reform, there was no significant wage gap between urban-born and rural-born graduates in our sample. Even though parents' income of rural-born graduates is much lower than that of urban-born graduates, the results suggest a significant advantage for the former compared to the latter in the labor market. We argue this could be the result of China's hukou -based university admissions system, which sets starkly different qualifying scores for different birthplaces, and, thus, the quality of students at the same university could differ by birthplace.
    Date: 2016–03
  12. By: Yuqing Xing (National Graduate Institute for Policy Studies)
    Abstract: This study investigates the impacts of rising wages and the appreciation of the yuan on the structure of China’s exports. China’s exports are classified here as ordinary exports (OE) and two distinctive groups of processing exports, pure assembly exports (PAE) and mixed assembly exports (MAE). The data analyzed here are derived from panel data covering China’s bilateral PAE and MAE trade with more than 100 trading partners from 1993 to 2013. Estimates of fixed effect models show that wage increases and the appreciation of the yuan reduced the proportion of assembly exports in China’s bilateral exports. Specifically, for a 1% increase in Chinese manufacturing wages, the share of PAE in China’s bilateral exports is expected to fall 1.6 percentage points and that of MAE to decrease by 1.1 percentage points; a 1% nominal appreciation of the yuan against the US dollar would be expected to lower PAE and MAE trade volume by 2.4 and 2.1 percentage points, respectively. The empirical results imply that rising wages and cumulative appreciation of the yuan have eroded China’s comparative advantage in the assembly of products for international markets, resulting in substantial contraction of processing exports. The analysis provides a supply-side explanation for the fall of China’s export growth.
    Date: 2016–04
  13. By: Samuel Marden (Department of Economics, University of Sussex)
    Abstract: In China, many fewer girls are born than would be expected given natural birth rates. This imbalance has worsened dramatically over the last 40 years. The roughly contemporaneous fall in fertility per woman is often mooted as a source of this apparent increased demand for sex selection: fewer births make it harder to have a son by chance. Despite this, causal evidence is limited. This paper exploits geographic variation in changes in fertility, arising as a consequence of China’s agricultural reforms (1978-84), to provide this evidence. Specifically, I show that households living in counties that benefitted more from the reforms, increased their fertility relative to households elsewhere. I then show that these households are also less likely to engage in sex selection. These changes appear to have been due to higher local incomes interacting with the enforcement of the One Child Policy. The timing of the changes in fertility and sex selection are informative: while fertility increased almost immediately, the decline in sex selection only emerged from the mid 1980s— contemporaneous with the widespread availability of ultrasound. These results suggest that the dramatic decline in fertility in 1970s China, as well as the smaller decline due to the One Child Policy in the 1980s, may have had an important role in fuelling the demand for sex selection.
    JEL: J11 J13 J16
    Date: 2016–03
  14. By: Vdovychenko, Artem; Zubrytskyi, Artur
    Abstract: The question of Ukraine's economic recovery after several years of rapid decline is closely connected to the reform of its fiscal policy. Because Ukraine is a country with a small, open economy, exports may be one of the drivers of economic recovery. Monetary policy over the past decades had, for various reasons, a limited impact on the dynamics of exports, while today, a long period of unsustainable fiscal policy forces the government to carry out fiscal consolidation. Adding together all these facts, we can state the importance of studying the influence of fiscal balance parameters on the exports of Ukraine. Using the gravity model, we conclude that fiscal consolidation has a positive effect on Ukraine's exports with a lag of several years. We also find that the effect of fiscal consolidation on exports is mainly due to the correction of the exchange rate. The stimulating effect of fiscal consolidation takes place on an intensive margin of exports; exposing serious structural problems in the Ukrainian economy.
    Keywords: structural budget balance, exports, gravity model, fixed effects, random effects, fiscal consolidation, monetary policy, and exchange rate.
    JEL: F10 H32 H62
    Date: 2016–01
  15. By: Lu, Hongyou; Xu, Wenli; Xu, Kun
    Abstract: From the perspective of environmental macroeconomics, in addition to environmental equilibrium effected by environmental policies, the fiscal policy have an impact on the environment equilibrium. On this basis, this paper constructs a RBC model with environmental equilibrium, that contains different financing mode of government environmental expenditure, within which incorporating fiscal spending shocks, labor income tax rate shock, capital income tax rate shock and environmental tax shock. Utilizing the historically macroeconomic data during 1978 to 2014, this paper estimate the long-run steady-state of macroeconomic and environmental variables, then simulate short-run fluctuation of these macro-variables. The results show that:(1) government environmental expenditure being arranged in the general budget, taxing emission achieve the "double dividend" that output increase by 0.13%, and the stock of carbon dioxide fall by 1.1%; (2) changes of environmental tax rates is one important source of volatility in the stock of carbon dioxide, volatility contribution rate of 87%; (3) changes in fiscal policy have a significant impact on short-term fluctuations of carbon dioxide, and the environmental effects of direction caused by expansionary fiscal policy depend on the fiscal policy type. Based on the above conclusions, this paper suggests the introduction of environmental taxes as quickly as possible, government environmental expenditure take the general tax financing mode, and a combination of modest increase in fiscal expenditure, reducing labor income tax rate and inceasing capital income tax rate in order to promote green development during "Thirteen Five Plan" period.
    Keywords: environmental tax; finacing mode; fiscal policies; business cycle
    JEL: E62 H23 H3 Q5
    Date: 2016–03–23
  16. By: Liu Zhaoyang (Downing College, Regent Street, Cambridge, CB2 1DQ, UK)
    Abstract: It is often conjectured that conservation policies for state-owned forests not only influence the state employees managing these forests, but the indigenous residents living in state forest regions as well. This research explored this conjecture by conducting a case study of the Natural Forest Protection Programme (NFPP) in China. A theoretical model was developed to describe the mechanism as to how NFPP impacts indigenous residents through influencing their labor allocation decisions. The theoretical predictions were then examined through empirical analyses based on household level micro-data collected from Gansu and Yunnan provinces in Western China. The analyses used alternative indicators of the NFPP intensity and rigorous econometric methods that controlled for potential selection and endogeneity issues in order to generate reasonable causality inferences. Both the theoretical predictions and empirical results found that NFPP negatively affects the total income of indigenous residents. Scrutiny into the variations of income components revealed that indigenous residents seem to be intensifying agricultural production activities, which implies that NFPP may have caused environmental leakage effects by shifting the environmental pressure from forests to cropland. These factors should be considered when designing prospective state forest reforms in the Western regions of China.
    Keywords: China, Community forestry or forest policies, Forestry, Econometric Analysis
    Date: 2015–10
  17. By: Ito, Tadashi; Matsuura, Toshiyuki; Yang, Chih-Hai
    Abstract: This paper examines the duration of intermediate goods imports and its determinants for Japanese affiliates in China. Our estimations, using a unique parent-affiliate-transaction matched panel dataset for a discrete-time hazard model over the 2000–2006 period, reveal that products with a higher upstreamness index, differentiated goods, and goods traded under processing trade are less likely to be substituted with local procurement. Firms located in more agglomerated regions with more foreign affiliates tend to shorten the duration of imports from the home country. For parent-firm characteristics, multinational enterprises that have many foreign affiliates or longer foreign production experience import intermediate goods for a longer duration.
    Keywords: East Asia, Japan, China, International trade, Imports, Foreign investments, FDI, Trade duration, Intermediate goods, Agglomeration
    JEL: F14
    Date: 2016–03
  18. By: Lei, Lei
    Abstract: The paper reviews relevant literature studying the environmental impacts of food supply chain from production to each stage throughout the supply chain. With limited data and information, to better understand these impacts, a concrete example of the tea supply chain in China is provided. The tea supply chain is analyzed from the environmental prospective, with potential pollutants being identified at each stage of the supply chain. As an example of the food supply chain in a developing country, some unique features of the developing economies are taken into consideration when concluding the implications.
    Keywords: China, International trade, Food industry, Tea, Environment, Supply chain analysis, Development
    JEL: F18 Q01
    Date: 2016–03
  19. By: Trostyanskiy Dmitriy Valer’evich; Kudaynazarova Dilnaz Koshkarbayevna
    Abstract: This paper is devoted to analysis of structural changes in industry of the Republic of Karakalpakstan under the impact of the environmental consequences of Aral sea’s evaporation. The research methodology consists of two approaches which are identification cause-effect in the structure of industry and indexation of structural shifts on sectoral level. Taking into account current year measures in industry economic and environmental development opportunities of the region in existing domestic and external conditions are assessed. Key words: structural changes, ecological impact, industry, development programs
    Date: 2016–03
  20. By: Ronald W. Anderson
    Abstract: This special paper discusses the inclusion of the Chinese Renminbi in the international reserve asset Special Drawing Right (SDR) created by the International Monetary Fund.
    JEL: J1
    Date: 2016–01–15
  21. By: Tran Tuan Anh (Faculty of Architecture, College of Sciences, Hue University)
    Abstract: This study applied a cost-benefit analysis (CBA) to quantify the economic benefits of long-term, safety-related measures put in place for housing. The results of the CBA show that the possible returns on investment in storm-resilient housing would be positive and high, which implies that investing in storm-resilient houses can be economically viable. The results also show that the returns would highly depend on the year when a storm event would take place. If an event would happen early in the housing lifetime, positive returns would be gained from the investment. From a private perspective, positive returns would encourage households to invest in housing resilience. Autonomous adaptation has been occurring and has generally been driven by individual households that are likely to result in substantial investments to increase the resilience of houses. The CBA results also show that storm-resilient housing would have high benefit-cost ratios. In order to encourage individual investment in storm-resilient housing, the government should consider offering assistance to households that agree to undertake appropriate climate-resilient housing. This may take the form of technical assistance, direct subsidies, or low-interest loans.
    Keywords: Vietnam, Climate Change, Adaptation Practices/Projects, Climate Change Impacts, Economic Analysis
    Date: 2016–03
  22. By: Thomas Markussen; Finn Tarp; Do Huy Thiep; Nguyen Do Anh Tuan
    Abstract: This paper uses panel data at commune, household, and plot levels to study the causes and effects of agricultural land fragmentation in rural Viet Nam. We focus on both inter-farm fragmentation (the division of land into many small farms) and intra-farm fragmentation (the division of each farm into many small plots). In both these dimensions, land holdings in Viet Nam are highly fragmented. Results show strong effects of both inter- and intra-farm fragmentation on labour input per hectare in agriculture. When productivity is measured by profits per hectare, we estimate a positive effect of farm size on productivity. Results on the determinants of fragmentation show that land sales markets reduce inter-farm fragmentation in the south of Viet Nam but not in the north. Administrative land consolidation programmes have some positive impact on land consolidation in the north but not in the south
    Keywords: poverty measurement, utility consistency, cost of basic needs
    Date: 2016
  23. By: Pastore,Francesco; Sattar,Sarosh; Sinha,Nistha; Tiongson,Erwin H. R.
    Abstract: Building on recent analyses that find a sizeable overall gender wage gap in Azerbaijan's workforce, this paper uses data on young workers in their early years in the labor market to understand how gender wage gaps evolve over time, if at all. The paper uses a unique database from a survey of young people ages 15?29 years. The analysis provides evidence that new labor market entrants begin with little or no gender differences in earnings, but a wage gap gradually emerges over time closer to the childbearing years. The gender wage gap grows from virtually zero, or even a small, positive gap in favor of women, until age 20 years, to about 20 percent two years later and even more than 30 percent at age 29 years. The gap in labor supply rises from almost zero to about 20 percent during the years from 19 to 22, while the gap in hours worked falls from positive (up to six hours per week more than their male counterparts) to negative (up to five hours per week less) over the same period in the life cycle. When decomposing the gap at different deciles of the wage distribution, it appears that most of it is at the lower and upper ends of the distribution, among young adults and prime-age workers. Selection of women into employment is strong and strongly skill-based: when controlling for sample selection bias, the gender gap becomes positive.
    Keywords: Gender and Development,Population&Development,Youth and Government,Labor Markets,Population Policies
    Date: 2016–03–21

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