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Wage Discrimination: Direct vs. Reverse Regression Method

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  • Kapsalis, Constantine

Abstract

Two methods of estimating wage discrimination have been employed so far in the literature: the direct regression method and the reverse regression method. What distinguishes the two methods is their assumption about the wage determination process: The direct regression method assumes that employees are paid according to their qualifications; by contrast, the reverse regression method assumes that wages are determined by the nature of the job and it is the qualifications of employees within that job classification that may vary. This paper develops a new measure of wage discrimination, referred to here as the combined method, which is based on combining the results of the two wage discrimination measures. Using randomly generated data, it can be demonstrated that the combined method will produce the correct estimate of wage discrimination, assuming that the two alternative wage determination processes outlined above are equally common in the labour market.

Suggested Citation

  • Kapsalis, Constantine, 2020. "Wage Discrimination: Direct vs. Reverse Regression Method," MPRA Paper 103184, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:103184
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    References listed on IDEAS

    as
    1. Kapsalis, Constantine, 1982. "A new measure of wage discrimination," Economics Letters, Elsevier, vol. 9(3), pages 287-293.
    2. Arthur S. Goldberger, 1984. "Reverse Regression and Salary Discrimination," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 293-318.
    3. 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.
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    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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