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Identifying and measuring economic discrimination

Author

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  • Sergio Pinheiro Firpo

    (Insper, Brazil, and IZA, Germany)

Abstract

Differences in wages between men and women, white and black workers, or any two distinct groups are a controversial feature of the labor market, raising concern about discrimination by employers. Decomposition methods shed light on those differences by separating them into: (i) composition effects, which are explained by differences in the distribution of observable variables, e.g. education level; and (ii) structural effects, which are explained by differences in the returns to observable and unobservable variables. Often, a significant structural effect, such as different returns to education, can be indicative of discrimination.

Suggested Citation

  • Sergio Pinheiro Firpo, 2017. "Identifying and measuring economic discrimination," IZA World of Labor, Institute of Labor Economics (IZA), pages 347-347, March.
    • Handle: RePEc:iza:izawol:journl:2017:n:347
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    References listed on IDEAS

    as
    1. Elder, Todd E. & Goddeeris, John H. & Haider, Steven J., 2010. "Unexplained gaps and Oaxaca-Blinder decompositions," Labour Economics, Elsevier, vol. 17(1), pages 284-290, January.
    2. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 1, pages 1-102, Elsevier.
    3. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    4. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    5. John S. Heywood & Daniel Parent, 2012. "Performance Pay and the White-Black Wage Gap," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 249-290.
    6. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    7. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
    8. Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-243, May.
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    Cited by:

    1. Sloczynski, Tymon, 2018. "Average Gaps and Oaxaca's Blinder Decompositions: A Cautionary Tale about Regression Estimates of Racial Differences in Labor Market Outcomes," IZA Discussion Papers 12041, Institute of Labor Economics (IZA).
    2. Chan, Chi Shing & Kwan, Fung & Lei, Ka Chon, 2022. "Wage differentials between local and foreign workers in Macao: Discrimination?," Journal of Asian Economics, Elsevier, vol. 81(C).
    3. Tymon Słoczyński, 2020. "Average Gaps and Oaxaca–Blinder Decompositions: A Cautionary Tale about Regression Estimates of Racial Differences in Labor Market Outcomes," ILR Review, Cornell University, ILR School, vol. 73(3), pages 705-729, May.

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    More about this item

    Keywords

    decomposition methods; Oaxaca-Blinder Decomposition; quantile decomposition; wage gap;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • J00 - Labor and Demographic Economics - - General - - - General

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