27 - University of California, Berkeley Department of...

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University of California, Berkeley Department of Economics EC196: Topics in Economic Research Second Paper What Determines Our Wage: The Econometric Analysis of Male-Female Wage Gap Mentor: Shari J. Eli
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EC196 Research Paper 2 2 Introduction The persistency of differentials by gender in the labor market is one of the key focus points of labor economics. Its importance in policy making is vast due to the necessity for mobility and heterogeneity of labor forces. It is important to know to which extent does gender play a role in determining wages, in order to target specific labor policies in the right direction. In addition, it is important to observe to which extent do other characteristics, such as race, nationality, religion or marital status, differently affect wages between men and women. As I demonstrate further in the paper, these differences indeed exist, and should be taken into consideration when forming future labor policies. The main purpose of this report is to examine the impact of gender and race in determining the hourly wage in UK. In an attempt to do so, I shall first analyze the literature on the topic, providing a short historical overview of the dynamics of the labor market discrimination. Afterwards, a quick analysis of the data is presented, outlining the main features and peculiarities of the dataset 1 . Furthermore, a model is estimated and its strengths and weaknesses are analyzed. Finally, I interpret and discuss the findings and potential policy implications that arise. Literature Analysis Economic discrimination in labor markets firstly needs to be defined. Modern economics literature conventionally defines it as the ‘presence of different pay for workers of the same ability’; or in other words, it is when equal productivity is not compensated by equal pay (Aigner and Cain, 1977: 175-77). Most popularly, a female/male wage gap is observed, although there are variations to this, particularly as a function of ethnicity. The black/white wage gap has been present ever since measurements on the topic have been conducted. The convergence of the black/white male wage gap during the 1960s and 1970s has been followed by a stagnation, which has continued now for almost 30 years (Altonji and Blank, 1999). Although I acknowledge that a number of other factors that can affect the amount a person is paid exist (such as previous unemployment, job characteristics, labor mobility, etc.), the focus of this paper will be 1 The data used is the UK Labour Force Survey, July – September, 2007 (LFS, 2007)
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EC196 Research Paper 2 3 exclusively on the wage gap. Naturally, this might lead to a bias in the models presented; an issue I will also touch upon. One of the advantages of observing hourly wage in comparison to weekly or monthly
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27 - University of California, Berkeley Department of...

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