On February 14, Prof. Muhammad Asali delivered a research seminar and presented his work on the relationship between the labor market and the healthiness of the economy. The paper, entitled “Labor Market Discrimination and the Macroeconomy,” which is a joint work with his former student Ms. Rusudan Gurashvili, aimed at measuring and documenting the discriminatory wage gaps in Georgia within gender and ethnic dimensions. Second, and more importantly, the study aimed at exploring the relationship between the found wage gaps and the macroeconomic performance of the country (as proxied by economic growth and unemployment).
Unlike the usual approach in the literature of this kind, which examines the growth-discrimination relationship in the framework of a cross-section of countries, the presented study introduced an innovative, time-series-based approach to study this relationship, in the short-run, the long-run, and the steady-state.
Beyond the methodological contribution, the main findings of the paper are threefold. Firstly, the Georgian labor market suffers from significant and persistent earnings discrimination, with larger gender discrimination than ethnic discrimination. Secondly, discrimination is found to harm the prospects of economic growth of the country, and this relationship is bidirectional, in that higher growth contributes to the reduction of labor market discrimination. Third, the paper offers evidence to support the labor-market-tightness hypothesis: discrimination tends to increase when the labor market is less tight (with higher unemployment rates).