| Abstract: | We measure the discriminatory ethnic and gender wage gaps in Georgia. Gender wage discrimination is larger than the ethnic wage discrimination. We use the estimated gaps in a general‐to‐specific vector autoregression framework to test for Granger causality between discrimination and growth, and estimate the long‐run effects of each variable on the other. Granger causality is found to be bidirectional, but it is only the net long‐run effect of discrimination on growth that is a large and highly significant negative effect. In the long‐run, a 10% increase in ethnic (gender) discrimination reduces economic growth by 3%–4% (8%–10%). Additionally, ethnic and gender wage differentials are found to be counter‐cyclical. |
