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Black–White Wage Differentials in a Multiple Sample Selection Bias Model

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  • John Baffoe-Bonnie

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Abstract

This paper simultaneously incorporates two sources of selection bias in the black-white wage equations. It demonstrates that the biases due to an individual’s propensity to be in the labor force and the firm’s hiring practices are important in determining the black–white wage differential and failure to account for both biases will result in inaccurate estimation of the black–white wage differential. We found that adjusting for double selection bias in the wage equation, the black–white female wage gap is 26% larger than the black–white male wage gap, and 12.1% larger when we adjust for a single selection bias. The results seem to suggest that at the macro level, the enforcement of policies related to racial issues in the labor market will likely lead to a reduction in the black–white wage gap. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • John Baffoe-Bonnie, 2009. "Black–White Wage Differentials in a Multiple Sample Selection Bias Model," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 1-16, March.
  • Handle: RePEc:kap:atlecj:v:37:y:2009:i:1:p:1-16
    DOI: 10.1007/s11293-008-9150-x
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    References listed on IDEAS

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    1. Schiller, Bradley R & Weiss, Randall D, 1980. "Pensions and Wages: A Test for Equalizing Differences," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 529-538, November.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    3. Reimers, Cordelia W, 1983. "Labor Market Discrimination against Hispanic and Black Men," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 570-579, November.
    4. Pesaran, M H & Smith, R P & Yeo, J S, 1985. "Testing for Structural Stability and Predictive Failure: A Review," The Manchester School of Economic & Social Studies, University of Manchester, vol. 53(3), pages 280-295, September.
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    More about this item

    Keywords

    Black and white wage differential; Multiple sample selection bias; Sequential decisions; J31;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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