Chapter9 - Click to edit Master subtitle style IIID Causes...

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Unformatted text preview: Click to edit Master subtitle style IIID Causes of Earnings Differences: Discrimination final cause of earnings differences One potential measure of labor market discrimination is the remaining earnings differential not explained by human capital, occupation, or job characteristics--approximately 12 cents of the gender wage gap. However, there are a couple of problems with this measure: this does not allow for discrimination that affects the human capital and occupation choices of women ( indirect discrimination ) Part of the unexplained portion of the gender earnings gap may be due to measurement error (and those unmeasurable factors discussed in chapter 7) we cannot measure luck/ connections ability/motivation physical characteristics indirect discrimination causing women to have less human capital I. An economist's definition of discrimination workplace discrimination occurs when two persons with same productivity and preferences but belong to different groups (race, gender, age group) receive different outcomes in wages, hiring, promotion. NOT the same as prejudice. Prejudice may result in discrimination, but discrimination can occur without any prejudice on the part of employers, employees or customers sex discrimination is distinct from racial discrimination in that the sexes are not segregated in households, and thus the discrimination is not rooted in an unwillingness to II. Types of evidence of workplace discrimination Direct testimony individual experiences with discrimination advantage : testimony by large numbers of victims shows a pattern : class action lawsuit problems : testimony by small numbers of victims is anecdotal and hinges on credibility cannot deal with unreported cases investigated companies may not be an accurate sample of all II. Types of evidence of workplace discrimination Auditing matched pairs of testers (identical in qualifications, but different in race or sex) sent for interviews with potential employers advantage : useful to find discrimination in hiring (as well as in consumer markets: loan, mortgage) problems : but not useful in documenting discrimination in raises or promotion II. Types of evidence of workplace discrimination Statistical evidence--wage regressions control for supply side factors (marriage, education, experience, location, etc.) and estimate unexplained wage differentials by sex for the economy or a particular firm or industry advantage : large sample, not anecdotal problems : unmeasured supply side factors may be counted as discrimination sample selection bias (women who are discriminated against in hiring will not appear in the sample) III. Theories of discrimination In a competitive market with rational , profit maximizing firms and utility maximizing agents and perfect information , no discrimination should occur (in the absence of government regulation)....
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Chapter9 - Click to edit Master subtitle style IIID Causes...

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