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Ethnicity and Earnings in Urban Peru

Author

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  • Hugo Nopo

    ()

  • Jaime Saavedra
  • Maximo Torero

Abstract

In this paper we study the relationship between ethnic exclusion and earnings in Urban Peru. Our approach to the concept of ethnicity involves the usage of instruments in many of its several dimensions: mother tongue, parental background, religion, migration events and race. In order to approximate what can be called racial differences in a context like the Peruvian in which "racial mixture" is the main characteristic of the population, we use a score-based procedure to capture both the differences and the mixtures. By means of this procedure each individual is assigned intensities by pollsters in each of the four categories that correspond to the most easily recognized distinct racial groups in the Peruvian society: Asiatic, White, Indigenous, and Black. We find that the multidimensional race indicator is correlated with several human capital and physical capital assets, as well as with access to public services. Using Blinder-Oaxaca (B-O) decompositions we find that a substantial part of the earnings differences between racial groups cannot be explainged by differences in individual characteristics. To take into account the fact that B-O doesn't consider the probability distribution of the individual characteristics, and specifically race in our case, we also use a semi-parametric technique for the estimation of differences in hourly earnings. This estimation treats the typical wage equations in a linear fashion but let estimators for the racial intensity effects to interact freely, without restricting them to a functional form. The results suggests that among wage earners after controlling for a large set of characteristics, there are racially related earnings differences in favor of predominantly White individuals. In the case of the self-employed, none of the empirical distributions of earning differences attributable to race is substantially above zero.

Suggested Citation

  • Hugo Nopo & Jaime Saavedra & Maximo Torero, 2004. "Ethnicity and Earnings in Urban Peru," Middlebury College Working Paper Series 0405, Middlebury College, Department of Economics.
  • Handle: RePEc:mdl:mdlpap:0405
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    File URL: http://www.middlebury.edu/services/econ/repec/mdl/ancoec/0405.pdf
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    References listed on IDEAS

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    1. Edward Telles & Nelson Lim, 1998. "Does it matter who answers the race question? Racial classification and income inequality in Brazil," Demography, Springer;Population Association of America (PAA), vol. 35(4), pages 465-474, November.
    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. Ruthanne Deutsch & Andrew Morrison & Hugo Nopo & Claudia Piras, 2005. "Working Within Confines: Occupational Segregation By Sex For Three Latin American Countries," The IUP Journal of Applied Economics, IUP Publications, vol. 0(3), pages 50-59, May.
    4. Hugo Ñopo, 2008. "Matching as a Tool to Decompose Wage Gaps," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 290-299, May.
    5. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-954, July.
    6. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
    7. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
    8. Hugo Ñopo, 2004. "The Gender Wage Gap in Peru 1986-2000: Evidence from a Matching Comparisons Approach," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, pages 9-37.
    9. Horowitz, Joel L., 2001. "The Bootstrap," Handbook of Econometrics,in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 52, pages 3159-3228 Elsevier.
    10. Barry R. Chiswick, 1988. "Differences in Education and Earnings Across Racial and Ethnic Groups: Tastes, Discrimination, and Investments in Child Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 571-597.
    11. 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.
    12. William A. Darity & Patrick L. Mason, 1998. "Evidence on Discrimination in Employment: Codes of Color, Codes of Gender," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 63-90, Spring.
    13. Scalera, Domenico & Zazzaro, Alberto, 2001. "Group reputation and persistent (or permanent) discrimination in credit markets," Journal of Multinational Financial Management, Elsevier, vol. 11(4-5), pages 483-496, December.
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    Citations

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    Cited by:

    1. Juan Pablo Atal & Hugo R. Ñopo & Natalia Winder, 2009. "New Century, Old Disparities: Gender and Ethnic Wage Gaps in Latin America," IDB Publications (Working Papers) 1131, Inter-American Development Bank.
    2. Hugo Nopo & Martin Moreno & Jaime Saavedra & Maximo Torero, 2003. "Gender and Racial Discrimination in Hiring: A Pseudo Audit Study for Three Selected Occupations in Metropolitan Lima," Middlebury College Working Paper Series 0404, Middlebury College, Department of Economics.
    3. Patricio Valenzuela & Hugo R. Ñopo, 2007. "Becoming an Entrepreneur," IDB Publications (Working Papers) 1951, Inter-American Development Bank.
    4. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
    5. Lourdes Gallardo & Hugo R. Ñopo, 2009. "Ethnic and Gender Wage Gaps in Ecuador," IDB Publications (Working Papers) 1646, Inter-American Development Bank.
    6. repec:dau:papers:123456789/12016 is not listed on IDEAS
    7. Alberto Chong & José Galdo & Jaime Saavedra-Chanduví, 2007. "Informality and Productivity in the Labor Market: Peru 1986 - 2001," Research Department Publications 4526, Inter-American Development Bank, Research Department.
    8. Harry Anthony Patrinos & Emmanuel Skoufias, 2007. "Economic Opportunities for Indigenous Peoples in Latin America : Conference Edition," World Bank Other Operational Studies 8019, The World Bank.
    9. Ñopo, Hugo, 2008. "An extension of the Blinder-Oaxaca decomposition to a continuum of comparison groups," Economics Letters, Elsevier, vol. 100(2), pages 292-296, August.
    10. Marco Castillo & Ragan Petrie & Máximo Torero, 2008. "Ethnic and Social Barriers to Cooperation: Experiments Studying the Extent and Nature of Discrimination in Urban Peru," IDB Publications (Working Papers) 3316, Inter-American Development Bank.
    11. Figueroa, Adolfo, 2010. "Is education income-equalizing?: evidence from Peru," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    12. Laure Pasquier-Doumer, 2005. "Perception de l’inégalité des chances et mobilités objective et subjective:une analyse à partir d’entretiens qualitatifs auprès de Liméniens," Working Papers DT/2005/17, DIAL (Développement, Institutions et Mondialisation).

    More about this item

    Keywords

    race discrimination; minorities; wage differentials; semi-parametric;

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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