The gender wage gap in Eritrea's Formal Labour Market

The continuing incidence of gender inequality in education is a significant obstacle to social and human development. One of the collective commitments of the world conference on education for all was aimed at universalizing access and promoting equity. Since then quite a good progress has been made towards gender parity in enrolment. The major importance of investment in education is the benefits that accrue to individuals in terms of lifetime earnings. The human capital theory explains wage differentials as a consequence of differing human capital stock. According to this theory, the attempt to break down barriers to women’s educational achievement indicates progress in closing gender wage gap. However, the theory is criticized for the reason that different rates of return on human capital might arise due to discrimination. The aim of this paper is to estimate the gender wage gap in Eritrea and find the portion of the gap that is explained by differences in human capital and the part of the gap that is due to discrimination using the traditional wage decomposition technique introduced by Blinder and Oaxaca (1973) and the method developed by Cotton (1988). The analysis of gender wage gap is important because it provides an essential reference point of measuring the progress of women and assessing the effectiveness of several policy initiatives.