The Russian-Ukrainian Earnings Divide

Ethnic differences are often considered to be powerful sources of diverse economic behaviour. In this paper, we investigate whether and how ethnicity affects Ukrainian labour market outcomes. Using micro data from the Ukrainian Longitudinal Monitoring Survey (ULMS) and Oaxaca-Blinder decomposition of earnings, we find a persistent and rising labour market divide between ethnic Russians and Ukrainians throughout Ukraine’s transition era. We establish that language rather than nationality is the key factor behind this ethnic premium favouring Russians. Our findings further document that this premium is larger among males than among females.