We present empirical evidence that large structural shocks are followed by changes in labor market inequality. Specifically, we study short-run fluctuations in adjusted gender wage gaps (unequal pay for equal work) following episodes of structural shocks in the labor markets, using several decades of individual data for a wide selection of transition countries. We find that for cohorts who entered the labor market after the onset of transition. Labor market shocks lead to significant declines in the gender wage gap. This decrease is driven mostly by episodes experienced among cohorts who enter the labor market during the transition. By contrast, we fail to find any significant relation for cohorts already active in the labor market at the time of transition. We provide plausible explanations based on sociological and economic theories of inequality.
Undergoing a large structural shock, labor markets indeed do become less inclusive, but it has taken us several turns to identify a convincing knowledge gap and hypotheses appealing to the academic community. A much different and earlier version of this text was in the past developed within DISCef project. Our work has since changed substantially: the deeper understanding of theoretical foundations has led to improving the empirical approach and information content of interpretation. Originally, we combined a study into gender wage gaps, with a study into gender employment gaps. This approach had too much empirical clutter and too dispersed theoretical foundations. Eventually, the original work has evolved into two separate studies: the current, focused on structural shocks and wage inequality, and a companion paper looking at long-term drivers of gender inequality in access to employment.
The files required to reproduce our findings are available below.