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Changing Wage Structure and Black-White Differentials Among Men and Women: A Longitudinal Analysis

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  • David Card
  • Thomas Lemieux

Abstract

Despite several decades of research there is still widespread disagreement over the interpretation of the wage differences between black and white workers. Do the differences reflect productivity differences, discrimination, or both? If lower black earnings reflect a productivity difference, then an economy-wide increase in the relative wages of more highly-skilled workers should lead to a parallel increase in the black-white earnings gap. We evaluate this hypothesis using longitudinal data for men and women from the Panel Study of Income Dynamics. Our findings suggest that returns to observed and unobserved skills of male workers rose by 5-10 percent between 1979 and 1985. For female workers, the return to observed skills was relatively constant while the return to unobserved skills increased by 15 percent. The evidence that black-white wage differentials rise with the return to skill is mixed. Among female workers the black-white wage gap widened in the early 1980s -- consistent with the premise that racial wage differences reflect a productivity difference. For men in our sample the black-white wage gap declined between 1979 and 1985 -- a change that is inconsistent with the rise in the return for skills.

Suggested Citation

  • David Card & Thomas Lemieux, 1994. "Changing Wage Structure and Black-White Differentials Among Men and Women: A Longitudinal Analysis," NBER Working Papers 4755, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4755
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    File URL: http://www.nber.org/papers/w4755.pdf
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    References listed on IDEAS

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    1. Blau, Francine D & Beller, Andrea H, 1992. "Black-White Earnings over the 1970s and 1980s: Gender Differences in Trends," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 276-286, May.
    2. Murphy, Kevin M & Welch, Finis, 1993. "Inequality and Relative Wages," American Economic Review, American Economic Association, vol. 83(2), pages 104-109, May.
    3. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    4. John Bound & Richard B. Freeman, 1992. "What Went Wrong? The Erosion of Relative Earnings and Employment Among Young Black Men in the 1980s," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 201-232.
    5. Gallant, A. Ronald & Jorgenson, Dale W., 1979. "Statistical inference for a system of simultaneous, non-linear, implicit equations in the context of instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 275-302.
    6. Smith, James P, 1993. "Affirmative Action and the Racial Wage Gap," American Economic Review, American Economic Association, vol. 83(2), pages 79-84, May.
    7. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    8. Kevin Murphy & Mark Plant & Finis Welch, 1984. "Cohort Size and Earnings," UCLA Economics Working Papers 352, UCLA Department of Economics.
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    Cited by:

    1. Becky Pettit & Stephanie Ewert, 2009. "Employment gains and wage declines: The erosion of black women’s relative wages since 1980," Demography, Springer;Population Association of America (PAA), vol. 46(3), pages 469-492, August.
    2. Borghans,Lex & Weel,Bas,ter & Weinberg,Bruce, 2005. "People People: Social Capital and the Labor-Market Outcomes of Underrepresented Groups," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    3. Lex Borghans & Bas Ter Weel & Bruce A. Weinberg, 2014. "People Skills and the Labor-Market Outcomes of Underrepresented Groups," ILR Review, Cornell University, ILR School, vol. 67(2), pages 287-334, April.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General

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