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The convenient basis representation for the valence band Hamiltonian in wurtzite semiconductors is proposed and the polarization selection rules in GaN-based quantum wells are found. The polarization dependent optical matrix elements in quantum wells are calculated for a finite in-plane electron momentum, that allows to calculate peak optical gain and laser threshold in the GaN-based quantum well structures. This article also addresses the role of alloy inhomogeneities in the optical gain in quantum well lasers. The peak gain is found as a function of statistical broadening caused by the In-content fluctuations. It is shown that the composition fluctuations in the active region influence the gain differently depending on a light polarization. The absolute value of the calculated gain is found to be in agreement with the experiment. © 2000 American Institute of Physics.