Page 86 - Azerbaijan State University of Economics

Zahra Huseynova: The Correlation Between Gender Pay GAP AND GDP Growth In Azerbaijan Economy

For example, it was claimed by Eastin and Prakash (2013) that economic growth is
likely to decrease gender inequality in the economy because of the enabling of women
to participate in labor market more. Additionally, Derlacz (2013) also support them
by analyzing the relationship between the gender pay gap and productivity
development for 18 OECD (Organization for Economic Co-operation Development)
countries. In the research, he divided labor force into six groups: based on gender:
male and female, and based on skill levels: low, medium, and high.

Gender pays differences’ comparison was referred on their ability levels to decide on
how entire production was altered by male and female employees, and their different
skill levels. The results of the analysis, it is shown that raise in the gender wage
inequality in all skill levels causes small level of economic growth. The reason is that
higher variations in wages discourages females from involving in the labor market,
therefore, women’s productivity declines which leads to decrease in economic
growth. Additionally, if female employees are paid lower number of wages, then it
also leads to decline in the capital per worker, as a result, slowdown of economic
development appears. Therefore, decreasing gender wage gap can result in increase
of females’ labor participation, and long-term economic growth.

Yet there are also some controversial ideas whether economic growth decrease or
increase wage inequality. When Schober and Ebmer (2011) analyzed economies of
export-oriented semi-industrialized countries like Azerbaijan, their literature revealed
different conclusions. While the previous research concludes positive correlation
between gender-based wage discrimination and economic growth meaning gender-
based wage discrimination and economic growth move in the same direction for
export-oriented countries, Schober and Ebmer showed that relation is negative, and
they move in the opposite directions for even export-oriented economies.
Nevertheless, Haas (2006) could actually explain this opposite finding by studing the
correlation between GDPs per capita GDP per capita and the ratio of annual wages of
men and women labor forces. His outcomes showed an interesting finding: the
correlation between GDPs per capita and the degree of the gender pay gap was
positive, however, relationship was negative when GDP per capita was squared. In
other words, when there is an increase in economic growth, the amount of the gender
pay inequality rises, however, when there is excessive rates of GDP per capita,
economic growth causes reduction in the gender pay inequality, which indicates the
Kuznets curve. Unfortunately, the literature also claims that there exists gender pay
gap in Azerbaijan economy. Additionally, there are also statements about correlation
between wage inequality and economic growth. Yet whether this relation is positive
or negative is still a question needs to be investigated in further research.

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