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Wages, Racial Composition, and Quality Sorting in Labor Markets

  • Hirsch, B.T.
  • Macpherson, D.A.

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 Department of Economics, Florida State University in its series Working Papers with number 1994_01_01.

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Length: 20 pages
Date of creation: 1994
Date of revision:
Handle: RePEc:fsu:wpaper:1994_01_01
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  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.
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  5. Freeman, Richard Barry, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Scholarly Articles 4631951, Harvard University Department of Economics.
  6. 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..
  7. 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.
  8. 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.
  9. Richard Startz & Lundberg, . "Private Discrimination and Social Intervention in Competitive Labor Markets," Rodney L. White Center for Financial Research Working Papers 19-81, Wharton School Rodney L. White Center for Financial Research.
  10. Gibbons, Robert & Katz, Lawrence F, 1992. "Does Unmeasured Ability Explain Inter-industry Wage Differentials?," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 515-35, July.
  11. 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.
  12. 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.
  13. David Card & Thomas Lemieux, 1993. "Wage Dispersion, Returns to Skill, and Black-White Wage Differentials," NBER Working Papers 4365, National Bureau of Economic Research, Inc.
  14. David Card & Alan Krueger, 1990. "School Quality and Black/White Relative Earnings: A Direct Assessment," Working Papers 652, Princeton University, Department of Economics, Industrial Relations Section..
  15. 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.
  16. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
  17. Michael Reich, 1978. "Who Benefits from Racism? The Distribution among Whites of Gains and Losses from Racial Inequality," Journal of Human Resources, University of Wisconsin Press, vol. 13(4), pages 524-544.
  18. Lang, Kevin, 1986. "A Language Theory of Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 363-82, May.
  19. Heckman, James J & Payner, Brook S, 1989. "Determining the Impact of Federal Antidiscrimination Policy on the Economic Status of Blacks: A Study of South Carolina," American Economic Review, American Economic Association, vol. 79(1), pages 138-77, March.
  20. Andrew M. Gill, 1989. "The role of discrimination in determining occupational structure," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 42(4), pages 610-623, July.
  21. James F. Ragan & Carol Horton Tremblay, 1988. "Testing for Employee Discrimination by Race and Sex," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 123-137.
  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.
  23. 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.
  24. 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.
  25. 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.
  26. Barry T. Hirsch & Edward J. Schumacher, 1992. "Labor Earnings, Discrimination, and the Racial Composition of Jobs," Journal of Human Resources, University of Wisconsin Press, vol. 27(4), pages 602-628.
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