Empirical studies generally find that the estimated discrimination coefficient
is larger in southern versus northern states. True or False: presuming that
the wage differential is due to employer discrimination, this necessarily
implies that there are more discriminating employers in the South than there
are in the North.
In the land of Chin there are two distinct and equally numerous peoples:
(1) yins; and (2) yangs. The yang have historically been stronger and more
aggressive that the yins. Both the yins and yangs play paddle tennis, but
paddle tennis tournaments have always been segregated by group because of
the physical advantages of the yangs. The yin do not object to paddle tennis
tournaments being segregated, but recently have been upset about the fact
that the top yin players receive less than the top yang players. You have
been hired by the Chin Paddle Tennis Association (CPTA) to access the market
for paddle tennis players. CPTA have asked you a few questions given below.
What is the most likely source of the wage differential between the
yin and yang paddle tennis players? Briefly explain.
Is this discrimination as economists define the term?
Is the wage differential likely to persist over time, or do conditions
in Chin have to change in order for the differential to disappear?
Over the last 30 years, firms have been moving from the primarily black
central cities to the primarily white suburbs. Assuming that this is due to
some form of discrimination, provide a brief explanation that is consistent
with:
a taste for discrimination by employers.
a taste for discrimination by customers
Is there a way to empirically distinguish between these two hypotheses?
Specifically, would the "type" of firm that finds it in its
best interest to move differ based on who had the taste for discrimination
(i.e., employers or customers)?
Suppose that two wage regressions are estimated for black and white workers:
wB = 5.0 + 0.10S
wW = 6.0 + 0.14S
where S is the number of years of schooling. The average years of schooling
for blacks and whites, respectively, is 12.2 and 13.6 years.
Draw on the same graph the respective wage profiles for black and white
workers. Indicate the raw wage differential for the average black and
white worker.
Calculate the Oaxaca decomposition. Indicate on your graph in (A), the
portion of the wage differential attributable to skill differences between
white and black workers and the portion due to labor market discrimination.
