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The Role of Premarket Factors in Black-White Wage Differences

Derek Neal, +1 more
- 01 Oct 1996 - 
- Vol. 104, Iss: 5, pp 869-895
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TLDR
In this paper, a parsimoniously specified wage equation that controls for skill with the score of a test administered as teenagers prepared to leave high school and embark on work careers or postsecondary education was used to measure the wage effects of current labor market discrimination against minorities.
Abstract
Many attempts to measure the wage effects of current labor market discrimination against minorities include controls for worker productivity that (1) could themselves be affected by market discrimination and (2) are very imprecise measures of worker skill. The resulting estimates of residual wage gaps may be biased. Our approach is a parsimoniously specified wage equation that controls for skill with the score of a test administered as teenagers prepared to leave high school and embark on work careers or postsecondary education. Independent evidence shows that this test score is a racially unbiased measure of the skills and abilities these teenagers were about to bring to the labor market. We find that this one test score explains all of the black-white wage gap for young women and much of the gap for young men. For today's young adults, the black-white wage gap primarily reflects a skill gap, which in turn we can trace, at least in part, to observable differences in the family backgrounds.

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References
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Journal ArticleDOI

Wage Discrimination: Reduced Form and Structural Estimates

TL;DR: In this paper, a distinction is drawn between reduced form and structural wage equations, and both are estimated They are shown to have very different implications for analyzing the white-black and male-female wage differentials.
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Problems with Instrumental Variables Estimation when the Correlation between the Instruments and the Endogenous Explanatory Variable is Weak

TL;DR: In this article, the use of instruments that explain little of the variation in the endogenous explanatory variables can lead to large inconsistencies in the IV estimates even if only a weak relationship exists between the instruments and the error in the structural equation.
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The bell curve : intelligence and class structure in American life

TL;DR: In this paper, the authors discuss the evolution of cognitive class and education in the United States and the role of race and ethnicity in cognitive ability in the development of cognitive ability and the level of American education.
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Does Compulsory School Attendance Affect Schooling and Earnings

TL;DR: This paper found that the season of birth is related to educational attainment and earnings, and that roughly 25 percent of potential dropouts remain in school because of compulsory schooling laws. But, they did not study the effect of compulsory attendance laws on educational attainment.
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On discrimination and the decomposition of wage differentials

TL;DR: In this paper, the authors examined four alternative methods for estimating the extent of labor market discrimination. All of the methods involve the decomposition of gross (unadjusted) wage differentials into discrimination and productivity components.
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Q1. What are the contributions in this paper?

In this paper, the authors presented a method to find the best ratio of the ratio of a 2.1 to a 3.5-approximation.