Methodology

The study only considers individuals employed in textile sector in Pakistan which corresponds to Code 13
of ISIC Rev.4. The first phase is to estimate the wage equation for both men and women employed in
textile sector.

W ij = j X ji +E ji

Where

(
0)

is the logarithmic of hourly wages for males and females employed in the textile sector

and :

j=1if individual is Male

j=2if individual is female

X ji is a
error term

k 1

vector of explanatory variables and

is a vector of unknown parameters. The

E j N (0, 2 ) and subscript i is for each individual.

The econometric framework adopted here to identify and quantify wage differentials was developed by
Blinder (Blinder, 1973) and Oaxaca (Oaxaca, 1973). Through differences in estimated coefficients
discrimination against women employed in textile sector is identified.
In our analysis we have the following wage equations for male and female respectively;

Here

W = m x 'i+

(
0)

W if = f x 'i + if

(
0)

Wm

Furthermore,

and

Wf

are the logarithmic of hourly wages for males and females respectively.

x is the matrix for explanatory variables,

' s represents least square estimates of the

unknown coefficients. Using the properties of least square estimators we can state:

W m = ^
m m '

(
0)

W f = ^
f f '

(
0)

W m

Where
and

m '

W f

and
and

^
m and

^
f

f '

represent logarithmic mean hourly wages for males and females respectively,
represent the mean vector of regressors for males and females respectively and

are the corresponding vectors of estimated coefficients.

Taking differences in mean logarithmic wages and the coefficient vectors and with some algebraic
manipulation we attain the following expression:
(
0)

W m W f = f ( ^
m ^
f ) + ^
f ( m f )'

Hence, the overall average wage differential is divided into two parts; explained part is due to differences
in productivity whereas unexplained part is due to discrimination. The unexplained part is also referred to
as the residual component (Blinder, 1973) (Oaxaca, 1973).
The first part of the right hand side of expression (6) provides us with the average estimates of the male
female wage gap in textile sector adjusted for productivity characteristics. The first part can be restated
as:

Uf = ' f ^

Where

Uf

represents unexplained part of expression (6) and

(
0)

^=( ^
m ^
f ) .

The approach described above is called index number approach and this approach lead to the index
number problem. Hence, expression (7) can be restated using average characteristics of males. Following
which expression (6) can be restated as:
(
0)

W m W f = m ' ( ^m ^
f )+ ^
f ( m f ) '
The first part of the right hand side of expression (8) can be restated as

Um= ' m ^ . This

provides with estimates for average adjusted wage gap between males and females employed in textile
sector based on average male characteristics. Due to the index number problem these estimates will be
different from that of expression (6).

Bibliography
Blinder, A. S. (1973). Wage Discrimination: Reduced form and structural estimates .
Journal of Human Resources , 436-455.
Oaxaca, R. (1973). Male-Female wage differential in Urban labor Market.
International Economic Review, 693-709.