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Wage Differentials in Israel: Endowments, Occupational Segregation, Discrimination, and Selectivity

  • Muhammad Asali


    (International School of Economics at Tbilisi State University)

I use a panel of cross sections income data between 1991 and 2003 to measure wage differentials between Israeli-Arab and Jewish workers in Israel. The wage gap discovered is decomposed into components corresponding to human capital, occupational segregation, selectivity, and a residual, which may reflect discrimination. The unadjusted hourly wage gap between Arab and Jewish workers almost doubled from 40% in 1991 to 77% in 1999. By 2003, however, it had declined to 56%. The study shows large fluctuations in the wage gap. Human capital differences explain a major part of the wage gap, but its contribution is susceptible to the non-discriminatory norm adopted. Occupational segregation accounts for about a third of the wage gap. Because sudden changes in the underlying characteristics of the populations are not likely - these were actually slightly converging over the study period - large part of the changes in the wage gap are likely to be due to labor market discrimination.

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Paper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number 011-08.

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Length: 46 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:tbs:wpaper:08-011
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  1. Ronald L. Oaxaca & Michael R. Ransom, 1999. "Identification in Detailed Wage Decompositions," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 154-157, February.
  2. Carneiro, Pedro & Heckman, James J & Masterov, Dimitriy V, 2005. "Labor Market Discrimination and Racial Differences in Premarket Factors," Journal of Law and Economics, University of Chicago Press, vol. 48(1), pages 1-39, April.
  3. Gad Levanon & Yaron Raviv, 2007. "Decomposing Wage Gaps between Ethnic Groups: The Case of Israel," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 1066–1087, April.
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  8. David Neumark, 1987. "Employers' discriminatory behavior and the estimation of wage discrimination," Special Studies Papers 227, Board of Governors of the Federal Reserve System (U.S.).
  9. Reimers, Cordelia W, 1983. "Labor Market Discrimination against Hispanic and Black Men," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 570-79, November.
  10. Shoshana Neuman & Ronald Oaxaca, 2004. "Wage Decompositions with Selectivity-Corrected Wage Equations: A Methodological Note," Journal of Economic Inequality, Springer, vol. 2(1), pages 3-10, April.
  11. 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.
  12. Neuman, Shoshana & Oaxaca, Ronald L, 1998. "Estimating Labour Market Discrimination with Selectivity Corrected Wage Equations: Methodological Considerations and an Illustration from Israel," CEPR Discussion Papers 1915, C.E.P.R. Discussion Papers.
  13. Neuman, Shoshana & Oaxaca, Ronald L, 2004. "Wage Differentials in the 1990s in Israel: Endowments, Discrimination and Selectivity," CEPR Discussion Papers 4709, C.E.P.R. Discussion Papers.
  14. Randall S. Brown & Marilyn Moon & Barbara S. Zoloth, 1980. "Incorporating Occupational Attainment in Studies of Male-Female Earnings Differentials," Journal of Human Resources, University of Wisconsin Press, vol. 15(1), pages 3-28.
  15. Miller, Paul W, 1987. "The Wage Effect of the Occupational Segregation of Women in Britain," Economic Journal, Royal Economic Society, vol. 97(388), pages 885-96, December.
  16. Neuman, Shoshana & Silber, Jacques G, 1996. "Wage Discrimination across Ethnic Groups: Evidence from Israel," Economic Inquiry, Western Economic Association International, vol. 34(4), pages 648-61, October.
  17. Amitabh Chandra, 2000. "Labor-Market Dropouts and the Racial Wage Gap: 1940-1990," American Economic Review, American Economic Association, vol. 90(2), pages 333-338, May.
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