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On The Measurement Of Illegal Wage Discrimination: The Michael Jordan Paradox

Author

Listed:
  • Juan Prieto Rodríguez

    () (Universidad de Oviedo)

  • Juan Gabriel Rodríguez

    () (Universidad Rey Juan Carlos)

  • Rafael Salas

    () (Universidad Complutense de Madrid)

Abstract

Standard wage discrimination models assume that independent observers are able to distinguish a priori which workers are suffering from discrimination. However, this assumption may be inadequate when severe penalties can be imposed on discriminatory employers. Antidiscrimination laws will induce firms to behave in such a way that independent observers (for instance, lawyers, economists) cannot easily detect discriminatory practices. This problem can be solved by estimating the discriminatory wage gap using finite mixture or latent class models because these procedures do not require the a priori classification of workers. In fact, the standard discrimination model can be seen as a particular case of our method when the probabilities of belonging to a group are fixed (to one or zero). We estimate discrimination coefficients for Germany and United Kingdom using the European Community Household Panel (ECHP). We obtain unambiguous higher discrimination in Germany for a wide set of measures

Suggested Citation

  • Juan Prieto Rodríguez & Juan Gabriel Rodríguez & Rafael Salas, 2006. "On The Measurement Of Illegal Wage Discrimination: The Michael Jordan Paradox," Working Papers 38, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2006-38
    as

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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2006-38.pdf
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    References listed on IDEAS

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    1. Andrew Clark & Fabrice Etilé & Fabien Postel-Vinay & Claudia Senik & Karine Van der Straeten, 2005. "Heterogeneity in Reported Well-Being: Evidence from Twelve European Countries," Economic Journal, Royal Economic Society, vol. 115(502), pages 118-132, March.
    2. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    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. Newell, Andrew & Reilly, Barry, 2001. "The gender pay gap in the transition from communism: some empirical evidence," Economic Systems, Elsevier, vol. 25(4), pages 287-304, December.
    5. Jenkins, Stephen P., 1994. "Earnings discrimination measurement : A distributional approach," Journal of Econometrics, Elsevier, vol. 61(1), pages 81-102, March.
    6. 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.
    7. James Albrecht & Anders Bjorklund & Susan Vroman, 2003. "Is There a Glass Ceiling in Sweden?," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 145-177, January.
    8. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-661, September.
    9. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
    10. Beard, T Randolph & Caudill, Steven B & Gropper, Daniel M, 1991. "Finite Mixture Estimation of Multiproduct Cost Functions," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 654-664, November.
    11. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
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    Cited by:

    1. Juan Gabriel Rodriguez & Rafael Salas & Juan Prieto-Rodriguez, 2008. "A theoretical model of wage discrimination with inspection fines," Economics Bulletin, AccessEcon, vol. 10(3), pages 1-9.
    2. repec:ebl:ecbull:v:10:y:2008:i:3:p:1-9 is not listed on IDEAS

    More about this item

    Keywords

    discrimination; wages; latent class model; finite mixture models.;

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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