Can Differences in Characteristics Explain Ethnic Wage Gap in Latvia?

Abstract

We used anonymized micro data from Labour Force Survey to estimate the ethnic wage gap in Latvia and find the factors that explain it. We found that a notable ethnic wage gap still exists in Latvia with non-Latvians earning 10 % less than Latvians in 2015. The results of Oaxaca-Ransom decomposition show that approximately two thirds of the ethnic wage gap are explained by differences in characteristics with the most important effects in favour of Latvians caused by segregation in better paying occupational groups, having Latvian citizenship and better education (higher education levels and more favourable segregation by education fields). This was partly offset by favourable segregation in sectors for non-Latvians. Quantile regressions show that ethnic wage gap is statistically significant in all deciles of wage distribution.