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The Reverse Regression Problem: Statistical Paradox or Artefact of Misspecification?

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  • Jeff Racine
  • Paul Rilstone

Abstract

The usual approach to wage discrimination asks whether certain individuals receive lower wages for the same level of productivity characteristics. The reverse approach asks whether these individuals are more productive given the same wages. When these hypotheses are tested, incompatible conclusions seem to result. To circumvent specification problems, nonparametric techniques were used to estimate Canadian male-female wage/experience profiles. The findings indicate that, when the correct functional form is specified and the effects of childrearing activities are controlled for, there exists a wage/experience gap favoring men regardless of the approach, suggesting that the paradox may be simply an artifact of misspecification.

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  • Jeff Racine & Paul Rilstone, 1995. "The Reverse Regression Problem: Statistical Paradox or Artefact of Misspecification?," Canadian Journal of Economics, Canadian Economics Association, vol. 28(3), pages 502-531, August.
    • Handle: RePEc:cje:issued:v:28:y:1995:i:3:p:502-31
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    Cited by:

    1. Stephen L. Ross, 2003. "What Is Known about Testing for Discrimination: Lessons Learned by Comparing across Different Markets," Working papers 2003-21, University of Connecticut, Department of Economics, revised Nov 2003.

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