Personal earnings inequality in Pakistan: Findings from the HIES 1993-94

Abstract

Major portion of the household earnings are the labour earnings of the household members. These earnings stem from the household's decisions regarding the investment in human capital and other factors such as regional location and employment sector. These decisions affect the distribution of life-long earnings of individuals. This study focuses on the distribution of earnings and the contribution of different factors causing inequality in the earnings. For this purpose, variance of log earnings is decomposed into inter-and intra-age-groups variance. The ordinary least squared estimation technique is used to find the determinants of earnings. The nationally representative Household Integrated Economic Survey (HIES) 1993-94 data is used for this analysis. This data set provide rich information about the socio-economic variables of the workers. Our results indicate that the youngest and the oldest age groups have the highest incident of inequality in their earnings. The mean earnings of these groups are even lower than the overall population mean. Regression results indicate that human capital factors play important role in the earnings and earnings increase with education. Those groups who earn below average have the lowest educational attainments. Other important factors include occupation of workers, industry association, gender, and their regional location.