The Gap that Survived the Transition: The Gender Wage Gap Over Three Decades in Estonia

Abstract

This paper looks at the gender wage gap throughout the transition from communism to capitalism and throughout fast economic convergence. The case of Estonia is used, and the labour force survey micro data is employed from 1989 to 2020. The communist regimes were characterized by highly regulated wage determination and the high educational attainment and labour market participation of women. Despite a formally egalitarian regime, the raw gender wage gap was as large as 41% in 1989. The large gender wage gap under communist rule diminished quickly during the transition to a capitalism, mainly due to the erosion of distortions in the labour market, such as low returns to education. The paper has two main messages, first, the position of women in the labour market has improved over the last three decades. The mechanism behind their gains is similar to those in other formerly centrally planned economies, the education of women is even better now, they are employed in better occupations and their returns to education are higher. Second, the gender wage gap was large already three decades ago and the unexplained part has been resistant to decline. This points to strong inertia in the gender wage gap and to the importance of longer-term factors in it. The decline in the gap is related to the overall decline in wage inequality, minimum wages have also contributed to this process. While gender attitudes have become much more egalitarian, it is difficult to prove their role.