Gender Wage Differentials in Uganda: Evidence from the Uganda National Household Survey

This paper investigates the causes of gender wage differentials in Uganda. Given the potential differences in wage setting mechanisms between urban and rural labor markets, we break up the sample between rural and urban sub-samples. We use data from the nationally representative Uganda National Household Survey for 2002-03 (UNHS 2002/03). We employ standard decomposition techniques based on Oaxaca (1973) to decompose the gender wage gap into labor market characteristics and treatment components. The Neumark (1988) decomposition technique is used to address the "index number" problem. Further, self-selection into wage employment is controlled for using the Heckman (1979) two-step sample selection correction technique. Our empirical results suggest that a substantial portion of the gender wage differential results from employer-driven differences in treatment. This is more so in rural areas. Controlling for selection, the unexplained portion of the gender wage gap is between 61 percent and 78 percent in rural areas. In urban areas, the unexplained portion of the gender wage gap is between 41 percent and 68 percent. Further, in urban areas, 24 percent of the gender wage gap is due to nepotism toward males while 22 percent is a result of discrimination against females. In rural areas on the other hand, 68 percent of the gender wage gap is attributed to discrimination against females while only 1 percent is due to nepotism toward males. Working Paper 07-2