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

  • Juan Prieto Rodríguez


    (Universidad de Oviedo)

  • Juan Gabriel Rodríguez


    (Universidad Rey Juan Carlos)

  • Rafael Salas


    (Universidad Complutense de Madrid)

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

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Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 38.

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Length: 34 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:inq:inqwps:ecineq2006-38
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  1. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  2. 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.
  3. Ronald Oaxaca, 1971. "Male-Female Wage Differentials in Urban Labor Markets," Working Papers 396, Princeton University, Department of Economics, Industrial Relations Section..
  4. Newell, Andrew T. & Reilly, Barry, 2001. "The Gender Pay Gap in the Transition from Communism: Some Empirical Evidence," IZA Discussion Papers 268, Institute for the Study of Labor (IZA).
  5. Jenkins, Stephen P., 1994. "Earnings discrimination measurement : A distributional approach," Journal of Econometrics, Elsevier, vol. 61(1), pages 81-102, March.
  6. 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 654-64, November.
  7. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  8. 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.
  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. 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.
  11. Andrew E. Clark & Fabrice Etilé & Fabien Postel-Vinay & Claudia Senik & Karine Van Der Straeten, 2005. "Heterogeneity in reported wel-being: Evidence from twelve European countries," Post-Print halshs-00754095, HAL.
  12. Dennis J. Aigner & Glen G. Cain, 1977. "Statistical theories of discrimination in labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(2), pages 175-187, January.
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