The Russian-Ukrainian Earnings Divide

Abstract

Ethnic differences are often considered to be powerful sources of diverse economic behaviour. In this article, we investigate to what extent ethnicity affects Ukrainian labour market outcomes. Using microdata from the Ukrainian Longitudinal Monitoring Survey and the Oaxaca-Blinder decomposition of earnings, we find a persistent and increasing labour market divide between ethnic Russians and Ukrainians throughout Ukraine's transition era. We establish that language, rather than nationality, isthe key factor behind this ethnic premium favouring Russians. Our findings further document that this premium is larger amongst males than females.