ip602 – measuring discrimination. source: fortin and schirle (2006)
TRANSCRIPT
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IP602 – Measuring discrimination
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Source: Fortin and Schirle (2006)
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Source: Goldin(2006), US data
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Source: Baker and Drolet (2009) “A New View of the Male/Female Pay Gap”
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‘Productive’ characteristics
• Indicators or human capital– Education levels / years of schooling– General experience in the labour market– Job-specific training and experience (tenure)
• Industry and occupation categories• Union status, public or private sector
W = f(S, X, T, I, O, U, P)
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Average wages
• Among men, – Wagem
i = am + bmXmi + ui
• Average wages among men, given X are:– Wagem = am + bmXm
• Among women, – Wagef
i = af + bfXfi + ui
• Average wages among women, given X are:– Wagef = af + bfXf
• 3 parts to the average wage – average level of experience, the return to experience, intercept
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Wages of men and women
af
am
bm
bf
Xf Xm
wagef
wagem
Higher average wages for men are due to more experience on average, higher pay with zero experience, and a higher return to their experience
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Oaxaca decomposition
• Simplified• Wagem– Wagef
= (am + bmXm)- (af + bfXf) = am + bmXm- af - bfXf + bmXf - bmXf
Rearrange:• Wagem– Wagef
= (am - af )+ (bm - bf )Xf + bm (Xm - Xf )
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Explained vs. Discrimination
• Explained portion:= bm (Xm - Xf) / (Wagem– Wagef)
• Unexplained portion: = (am - af )+ (bm - bf )Xf / (Wagem– Wagef)
If we account for enough productive characteristics, we would describe the unexplained portion as being discrimination against women.
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Explained vs. unexplained – US, 1998Source: table 7-1, Blau, Ferber and Winkler
Characteristics Percent explainedEducational attainment -6.7Labour force experience 10.5Race 2.4Occupational categories 27.4Industry category 21.9Union status 3.5Total explained 58.9%
Total unexplained 41.1%
Wage differential (%) 20.3%
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Explained vs. Discrimination
• Restate the previous results:• Female – male wage ratio = 80%• unadjusted wage differential = 20%• 53% of the 20% is explained by differences in
productivity characteristics (11%)• productivity adjusted wage ratio = 91%• Ie. If comparing equally qualified men and
women, women’s wages are 91% of men’s.