Assessing Gender Gap in Wage and Self-Employment: Evidence from Ethiopia

Abstract

This study analyzes the status of the gender gap in labor force participation in Ethiopia. The factors that influence men’s and women’s decision to work and how much to work in wage and self-employment are assessed. The study mainly used data from the recent round of the Ethiopia Socioeconomic Survey (ESS 2018/19). The Heckman selection model is used to analyze factors that affect the participation of women in wage and self-employment. To decompose gender gaps in economic outcomes (i.e. wage and sales), the study applied the Blinder-Oaxaca decomposition method. The participation of women in wage employment is found to be significantly lower than men while controlling for individual and household level predictors. Women with tertiary education show higher participation in wage employment compared to women with no such education. Age, household headship, and wealth are additional factors that positively associate with women’s participation in wage employment. Marriage, residence in rural areas, having a large family size, and non-labor income are factors associated with lower participation of women in wage employment. The participation of women in ownership of non-farm household enterprises is found to be relatively higher than men while relevant individual, household, and business level characteristics are accounted for. The business sales of women-owned businesses are significantly lower than those owned by men. Women’s ownership of non-farm enterprises is negatively associated with their level of education. Though having tertiary education is negatively associated with participation in self-employment, its effect on business sales is positive. Sales are also positively associated with a business license, the number of hired workers, and operating costs. Family size and residing in rural areas are factors associated with less participation of women in selfemployment. The Blinder-Oaxaca decomposition analysis results show that the unconditional wage gap between men and women is estimated to be 62.7%. Of this gender wage gap, 26.2% is explained while the remaining 73.8% is unexplained. Differences in age, education, religion, marital status, household headship, wealth, and occupation account for the explained part of the wage gap. Likewise, the unconditional sales gap for non-farm enterprise owners is estimated at 80.6% where 36% of it is explained by model predictors. Education, religion, wealth, business license, operating cost, and residence are factors that contributed to the explained part of the sales gap. Narrowing the gender gap in labor market participation and economic outcomes will require interventions ranging from improving the education status of women to shaping the role and responsibilities of women in society.