Disability and labor market earnings: Physically and mentally disabled earnings gaps in Peru

In Peru, more than one million of people have a disability. This group may face barriers due to low labor force participation and earning rates comparing people without disability. This paper contributes to the literature for developing countries, analyzing the impact of the disability on labor market outcomes. We distinguish between physically and mentally disabled people. Using data from the 2014-2016 National Household Survey, we estimate parametric and non-parametric wage decompositions. The results reveal that wage gap is higher against disabled people when comparing non-mentally and mentally disabled people, than comparing non-physically and physically disabled people. Furthermore, we found a substantial unexplained component of the wage gap, suggesting discrimination and stigma in the labor market, mostly against mentally disabled people. The results are robust to alternative specifications.