Wage Differentials, Discrimination and Inequality: A Cautionary Note on the Juhn, Murphy and Pierce Decomposition Method
AbstractThis paper shows how difficult it is to study the roles of discrimination and unobserved skills when studying changes in racial and gender wage gaps over time by examining merits and shortcomings of a popular decomposition method by Juhn, Murphy and Pierce (1991). The JMP method shows that wage dispersion can offer a compelling explanation of the wage gap. However, JMP have to rely on a few strong assumptions in order to derive their decomposition equation which introduces wage inequality as the price of unobserved skills (the standard deviation of the residuals) into their decomposition equation.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2937.
Length: 16 pages
Date of creation: Jul 2007
Date of revision:
Publication status: published in: Scottish Journal of Political Economy, 2009, 56(1), 114-122
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Other versions of this item:
- Myeong-Su Yun, 2009. "Wage Differentials, Discrimination And Inequality: A Cautionary Note On The Juhn, Murphy And Pierce Decomposition Method," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(1), pages 114-122, 02.
- J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
- D30 - Microeconomics - - Distribution - - - General
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- Solomon W. Polachek & Jun Xiang, 2009. "The Gender Pay Gap across Countries: A Human Capital Approach," SOEPpapers on Multidisciplinary Panel Data Research 227, DIW Berlin, The German Socio-Economic Panel (SOEP).
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- Essama-Nssah, B., 2012. "Identification of sources of variation in poverty outcomes," Policy Research Working Paper Series 5954, The World Bank.
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