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Wages, racial composition, and quality sorting in labor markets

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B. T. Hirsch
D. A. Macpherson

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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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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1038-94.

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Handle: RePEc:wop:wispod:1038-94

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Lang, Kevin, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 363-82, May. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
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  4. Silber, Jacques G., 1989. "On the measurement of employment segregation," Economics Letters, Elsevier, vol. 30(3), pages 237-243, September. [Downloadable!] (restricted)
  5. David Card, 1992. "The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?," NBER Working Papers 4195, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
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  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. [Downloadable!] (restricted)
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  8. Gibbons, Robert & Katz, Lawrence F, 1992. "Does Unmeasured Ability Explain Inter-industry Wage Differentials?," Review of Economic Studies, Blackwell Publishing, vol. 59(3), pages 515-35, July. [Downloadable!] (restricted)
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  9. Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
  12. Lundberg, Shelly J & Startz, Richard, 1983. "Private Discrimination and Social Intervention in Competitive Labor Markets," American Economic Review, American Economic Association, vol. 73(3), pages 340-47, June. [Downloadable!] (restricted)
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  13. Card, David & Krueger, Alan B, 1992. "School Quality and Black-White Relative Earnings: A Direct Assessment," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 151-200, February. [Downloadable!] (restricted)
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  14. Paracchi, F. & Welch, F., 1992. "How Representative Are Matched Cross Sections? Evidence from the Current Population Survey," Working Papers 92-53, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  15. Kenneth Arrow, 1971. "The Theory of Discrimination," Working Papers 403, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
  16. 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. [Downloadable!] (restricted)
  17. Bergmann, Barbara R, 1971. "The Effect on White Incomes of Discrimination in Employment," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 294-313, March-Apr. [Downloadable!] (restricted)
  18. 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.. [Downloadable!] (restricted)
  19. 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. [Downloadable!] (restricted)
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  20. Andrew M. Gill, 1989. "The role of discrimination in determining occupational structure," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 42(4), pages 610-623, July.
  21. 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. [Downloadable!] (restricted)
  22. 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. [Downloadable!] (restricted)
  23. repec:fth:prinin:312 is not listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
    Other versions:
  2. Neuman, Shoshana & Oaxaca, Ronald L., 2004. "Wage Differentials in the 1990s in Israel: Endowments, Discrimination, and Selectivity," IZA Discussion Papers 1362, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. 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.
  4. Hirsch, Barry T. & Macpherson, David A., 2003. "Wages, Sorting on Skill, and the Racial Composition of Jobs," IZA Discussion Papers 741, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Edward J. Schumacher & Marjorie L. Baldwin, 2000. "The American with Disabilities Act and the Labor Market Experience of Workers with Disabilities: Evidence from the SIPP," Working Papers 0013, East Carolina University, Department of Economics. [Downloadable!]
  6. 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. [Downloadable!]
    Other versions:
  7. 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. [Downloadable!]
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