Does human capital influence the gender gap in earnings? Evidence from four developing countries

This paper investigates the relationship between human capital and the gender gap in earnings in four developing countries. We use high-quality panel data spanning 12 years from Ethiopia, India, Peru, and Vietnam, to construct latent stocks of cognitive and non-cognitive skills measured during adolescence. We investigate the relationship between these skills and subsequent earnings acquired in early adulthood, thereby avoiding common challenges of measurement error and simultaneity issues. Our results suggest that women earn significantly less than men in all four countries, even after accounting for differences in carefully constructed skill endowments. Interestingly, the gender gap in earnings decreases at higher cognitive skill levels in two out of the four countries. We find that these country-level variations are driven by differences in employment status as opposed to differences in earnings among the employed, and may reflect differences in unpaid care work. We further explore how the gender earnings gap varies in the context of the COVID-19 crisis. While earnings decreased for both men and women during this period, the pre-pandemic relationships between human capital and gender gaps persisted and were strengthened. By comparing the same youth cohort in different countries and periods, we elucidate the contexts under which human capital can become a force of gender convergence in the labour markets of developing countries.