Explaining changes in Sri Lanka’s wage distribution, 1992-2014: a quantile regression analysis

Sri Lanka experienced robust economic growth during the period 1992–2014 and had a decline in inequality due to wages rising fastest among low earners. The decline in inequality came almost entirely from rising rewards to low-skill labor, consistent with Sri Lanka’s comparative advantage in the global economy. However, educational and occupational upgrading served to widen wage gaps between the highest earners and the rest of the workforce. Using quantile regression analysis, this study also finds that selection bias overestimates average wages and underestimates the level of inequality, while exaggerating the extent to which women’s wages grew. It concludes with a discussion of the negative implications of persistent inequities across education, occupation, and gender, and recommends policies to address them.