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Wages, Racial Composition, and Quality Sorting in Labor Markets

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Author Info

  • Hirsch, B.T.
  • Macpherson, D.A.

Abstract

This paper examines the relationship between wage rates and the racial composition of jobs, using large cross-sectional and longitudinal samples constructed from monthly Current Population Surveys for 1983-92. Support is found for a "quality sorting" model that posits an equilibrium in which the racial composition of jobs serves as a skill index of unmeasured labor quality. Estimation of standard wage-level equations shows that wages of both black and white workers are substantially lower in occupations with a high density of blacks. Consistent with the quality sorting hypothesis, the magnitude of the relationship is reduced sharply after accounting for occupational skill measures. Longitudinal wage-change estimates controlling for person-specific quality indicate little if any causal effect of racial composition on wages. Estimates of racial discrimination are reduced only moderately after accounting for racial composition; unexplained differentials occur within occupations or reflect inter-occupational differences uncorrelated with racial composition and occupational skill measures.

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Bibliographic Info

Paper provided by Department of Economics, Florida State University in its series Working Papers with number 1994_01_01.

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Length: 20 pages
Date of creation: 1994
Date of revision:
Handle: RePEc:fsu:wpaper:1994_01_01

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Keywords: wages ; labour market;

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References

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  1. Francisco L. Rivera-Batiz, 1992. "Quantitative Literacy and the Likelihood of Employment among Young Adults in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 313-328.
  2. Michael Reich, 1978. "Who Benefits from Racism? The Distribution among Whites of Gains and Losses from Racial Inequality," Journal of Human Resources, University of Wisconsin Press, vol. 13(4), pages 524-544.
  3. Robert Gibbons & Lawrence F. Katz, 1989. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," NBER Working Papers 3182, National Bureau of Economic Research, Inc.
  4. Bound, John & Krueger, Alan B, 1991. "The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 1-24, January.
  5. Card, David & Lemieux, Thomas, 1996. "Wage dispersion, returns to skill, and black-white wage differentials," Journal of Econometrics, Elsevier, vol. 74(2), pages 319-361, October.
  6. Hwang, Hae-shin & Reed, W Robert & Hubbard, Carlton, 1992. "Compensating Wage Differentials and Unobserved Productivity," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 835-58, August.
  7. James J. Heckman & Brook S. Payner, 1989. "Determining the Impact of Federal Antidiscrimination Policy on the Economic Status of Blacks: A Study of South Carolina," NBER Working Papers 2854, National Bureau of Economic Research, Inc.
  8. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226041162.
  9. Lang, Kevin, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 363-82, May.
  10. Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
  11. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  12. Chiswick, Barry R, 1973. "Racial Discrimination in the Labor Market: A Test of Alternative Hypotheses," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1330-52, Nov.-Dec..
  13. William T. Dickens & Brian A. Ross, 1984. "Consistent Estimation Using Data From More Than One Sample," NBER Technical Working Papers 0033, National Bureau of Economic Research, Inc.
  14. David Card & Alan B. Krueger, 1991. "School Quality and Black-White Relative Earnings: A Direct Assessment," NBER Working Papers 3713, National Bureau of Economic Research, Inc.
  15. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
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  17. Johnson, George & Solon, Gary, 1986. "Estimates of the Direct Effects of Comparable Worth Policy," American Economic Review, American Economic Association, vol. 76(5), pages 1117-25, December.
  18. James F. Ragan & Carol Horton Tremblay, 1988. "Testing for Employee Discrimination by Race and Sex," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 123-137.
  19. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-44, October.
  20. Barry T. Hirsch & Edward J. Schumacher, 1992. "Labor Earnings, Discrimination, and the Racial Composition of Jobs," Journal of Human Resources, University of Wisconsin Press, vol. 27(4), pages 602-628.
  21. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers 19-81, Wharton School Rodney L. White Center for Financial Research.
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  23. Silber, Jacques G., 1989. "On the measurement of employment segregation," Economics Letters, Elsevier, vol. 30(3), pages 237-243, September.
  24. Andrew M. Gill, 1989. "The role of discrimination in determining occupational structure," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 42(4), pages 610-623, July.
  25. O'Neill, June, 1990. "The Role of Human Capital in Earnings Differences between Black and White Men," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 25-45, Fall.
  26. repec:fth:prinin:312 is not listed on IDEAS
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Citations

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Cited by:
  1. Edward J. Schumacher & Marjorie Baldwin, 2000. "The Americans with Disabilities Act and the Labor Market Experience of Workers with Disabilities: Evidence from the SIPP," JCPR Working Papers 178, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Barry T. Hirsch & David A. Macpherson, 2004. "Wages, Sorting on Skill, and the Racial Composition of Jobs," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 189-210, January.
  3. Harry J. Holzer, . "Black Applicants, Black Employees, and Urban Labor Market Policy," Institute for Research on Poverty Discussion Papers 1162-98, University of Wisconsin Institute for Research on Poverty.
  4. H. J. Holzer & K. R. Ihlanfeldt, . "Customer Discrimination and Employment Outcomes for Minority Workers," Institute for Research on Poverty Discussion Papers 1122-97, University of Wisconsin Institute for Research on Poverty.
  5. Patrick Mason, 1997. "Race, culture, and skill: Interracial wage differences among African Americans, Latinos, and whites," The Review of Black Political Economy, Springer, vol. 25(3), pages 5-39, March.
  6. Mason, Patrick L., 1997. "Race, culture, and skill: interracial wage differentials among African Americans, Latinos, and whites," MPRA Paper 11329, University Library of Munich, Germany.
  7. repec:iza:izadps:dp1362 is not listed on IDEAS

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