## Labor Market and Gender, Republic of Kosovo (SIP/2025/002)

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**Canonical URL:** [Labor Market and Gender, Republic of Kosovo (SIP/2025/002)](https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025002.pdf)

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### A. Introduction
- Kosovo’s female labor force participation (FLFP) rate is below 20 percent, ranking as the fifth lowest in the world and the lowest in Europe.
- FLFP is an outlier compared with the Western Balkans average of 45 percent and the EU-27 average of 55 percent.
- The gender participation gap is about 30 percentage points relative to the male participation rate in the labor force.
- FLFP has declined since 2012 when it was about 30 percent.
- Main drivers of low FLFP:
  - Family responsibilities, particularly childcare, are the main reason for women’s inactivity.
  - High and persistent female unemployment leading to a large incidence of discouraged female workers.
  - Perception that “no work is available.”
  - Education and training are less pronounced reasons for women than men.
  - Social norms and stereotypical gender roles.
  - Presence of a gender wage gap could discourage participation (see section C).
- Demographic context:
  - Kosovo has one of the youngest populations in Europe, average age 30½ years.
  - Fertility rate fell from 2¾ children per woman in 2000 to 1½ in 2022.
  - Large emigration and declining fertility will reduce the working-age population over time, weakening long-term growth and welfare.

### B. Growth Dividends from Integrating Women into the Labor Force
- Potential labor supply impact:
  - If Kosovo reaches the average FLFP of the Western Balkans, an additional 180 thousand women could be incorporated into the labor force.
- Methodology:
  - The IMF’s Equity Gain model is used to compute a counterfactual GDP contribution by sequentially substituting female labor market variables with male benchmarks across occupations and gender: y_L = Σ_j P_j a_j Σ_i m_ij h_ij ω_ij (notation as in source).
- Estimated potential gain to GDP:
  - Overall gain of 22.9 percent in GDP from eliminating gender gaps, decomposed as:
    - 19.3 percent from closing the employment gap
    - 1.1 percent from eliminating the working hours gap
    - 2.5 percent from reducing the wage gap

### C. Gender Wage Gap
- Previous estimates using Blinder-Oaxaca (BO) decomposition:
  - Studies (Kosovo Agency for Gender Equality 2020a; Gashi and Adnett 2020) applied BO to 2017 data and found a gender wage gap of about 14 percent using monthly wages.
  - Gashi and Adnett additionally estimated the gap at 6 percent using hourly wages.
- Limitations of BO:
  - Parametric assumptions (error distribution, functional form) may not hold.
  - BO assumes sufficient common support between male and female characteristic distributions; lack of common support (out-of-support) can bias estimates.
- Nonparametric matching approach (Nopo 2008) used in this paper:
  - Decomposition accounts for common support (S) and out-of-support (S̅) components; final decomposition: ∆ = ∆x + ∆O + ∆m + ∆f (notation as in source).
- Matching results (2022 Labor Force Survey; log wage per hour explained by experience, education, economic sector NACE 2-digits):
  - Estimated overall wage gender gap: 10.7 percent (unexplained portion implying discrimination).
  - Interpretation: Δx is positive — part of wages explained by endowments favors women, possibly because only better-qualified women participate given low FLFP.
- Table 1. Kosovo: Results of the Economic Analysis (IMF staff estimations)
  - Matched / Unmatched / Total / Average wage
    - Male 60898 706 €2.293
    - Female 26015 275 €2.243
    - Total 86811 3981 €2.279
  - Decomposition components (exact values):
    - Δ -0.0226
    - Δx 0.0850
    - ΔO -0.1079
    - Δm -0.0069
    - Δf 0.0072

### D. Conclusions and Policy Recommendations
- Institutional context:
  - Kosovo’s legal framework against discrimination is strong but implementation remains weak.
  - Kosovo scores 91.9 out of 100 in the 2023 World Bank Women, Business, and the Law (WBL) index, showing an increasing trend over time.
  - World Bank (2024) finds Kosovo has the largest difference between expert opinions score and legal framework score in the region.
- Recommended policies to increase FLFP (drawn from cross-country evidence and local assessments):
  - Increase access to affordable and accessible childcare and reform parental leave:
    - Current maternity leave is 12 months, of which 9 months are paid.
    - Reform options include combining maternity and paternity leaves with some budget financing (Dobranja 2022).
  - Expand educational and training opportunities for women:
    - Targeted programs to support re-entry after long-term unemployment and to support female entrepreneurs.
    - Align employment training with market demand and employer-required skills (Democracy for Development Institute 2017).
  - Introduce and strengthen gender budgeting practices:
    - Gender budgeting has been mandatory since 2015 (Law on Gender Equality) but implementation is weak; challenges include lack of performance-based budgeting (Public Expenditure and Financial Accountability Gender Responsive Public Financial Management Assessment Report 2022).
  - Provide better work-life balance policies:
    - Promote wider implementation of practices like teleworking (mentioned by workshop participants in Pristina).

*Source: IMF staff estimations and analysis in "Labor Market and Gender, Republic of Kosovo" (SIP/2025/002), completed December 4, 2024.*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025002.pdf_