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: Yins and Yans. The Yang have historically been stronger and more aggressive that the Yins. Both the Yins and Yans play paddle tennis, but paddle tennis tournaments have always been segregated by group because of the physical advantages of the Yans. 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 Yan 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 Yan 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 whether it was the employers or the customers who had the taste for discrimination?
Suppose that two wage regressions are estimated for black and white workers:
wB = 5.0 + 0.10 Sand wW = 6.0 + 0.14 S
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 the respective wage profiles for black and white workers on the same graph. 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.
The classical treatment of employer-based discrimination is to associate each employer with a discrimination coefficient, d, wherein each employer faces competitive wages of wW for whites and wB for blacks but acts as if she faces competitive wages of wW for whites and wB(1+d) for blacks.
This question asks you to think of employer-based discrimination in a slightly different way. Suppose the discrimination coefficient increases as the firm employs more black workers. In particular, suppose that the discrimination coefficient is
d = 0.01 EB
where EB is the number of blacks hired by the firm. As usual, assume the labor market is competitive so that the firm faces wages of wB and wW. Moreover, assume that the firm must employ 200 workers. Define the wage ratio to be wW / wB and solve and graph the number of blacks hired as a function of only the wage ratio (put the number of blacks hired on the x-axis and the wage ratio on the y-axis.
