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The Gender Gap in Earning: Methods and Evidence Chapter 10.

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Presentation on theme: "The Gender Gap in Earning: Methods and Evidence Chapter 10."— Presentation transcript:

1 The Gender Gap in Earning: Methods and Evidence Chapter 10

2 Regression analysis Shows relationship between a dependent variable and a set of independent or explanatory variables (or exogenous)

3 Regression analysis Where Y=earnings and the Xs explanatory variables so that as an example: Earning = α + β 1 x Years Education + β 2 x Years of Work Experience + β 3 x Black + β 4 x Hispanic + β 5 x Asian + β 6 x Gender + β 7 x North + β 8 x West + μ

4 Regression analysis Where years education and years work experience are continuous variables Black, Hispanic, Asian, Male, North, West are dummy variables. So that for instance: Black=1 if individual is Black, 0 otherwise (o.w.) Hispanic = 1 if individual is Hispanic, 0 o.w. Male = 1 if individual is Male, 0 o.w.

5 Regression analysis There must always be n-1 dummy variables. So in the case of regions if the regions are North, West, and South the: North =1 if individual leaves in the North, 0 o.w. West = 1 if individual leaves in the West, 0 o.w. So the variable left out is South

6 Regression analysis Oaxaca Decomposition is:

7 A NUMERICAL EXAMPLE OF A OAXACA DECOMPOSITION WOMENMEN Y$25,000$45,000 X EXPLAINED: UNEXPLAIN:

8 EXPLAINING THE GENDER GAP IN EARNINGS, 1976 Table 10.2, p. 372 A. AVERAGE WAGE RATE AND SKILLS FOR WHITE MEN, WHITE WOMEN, AND BLACK WOMEN SKILL OR CHARACTERISTICWHITE MEN WHITE WOMEN BLACK WOMEN HOURLY WAGE$5.60$3.61$3.17 YEARS OF EDUCATION WORK HISTORY YEARS NOT IN THE LABOR FORCE YEARS WITH CURRENT EMPLOYER YEARS OF OTHER WORK EXPERIENCE PROPORTION OF YEARS PART-TIME % % % INDICATORS OF LABOR FORCE ATT. HOURS OF WORKED MISSED BECAUSE OF ILLNESS PLACE LIMITS ON JOB HOURS OR LOCATION % % %

9 EXPLAINING THE GENDER GAP IN EARNINGS, 1976 Table 10.2, p. 372 B.SOURCES OF THE WAGE GAP BETWEEN WHITE AND BLACK WOMEN AND WHITE MEN EXPLAINED YEARS OF EDUCATION WORK HISTORY LABORFORCE ATTACHMENT TOTAL EXPLAINED % 39% 3% 44% 11% 22% 0% 33% UNEXPLAINED-56%67%

10 THE IMPACT OF HUMAN CAPITAL AND FAMILY STATUS ON MALE AND FEMALE EARNINGS, 1991 Table 10.3, p. 375 VARIABLE CONTRIBUTION TO WAGE GAP EXPLAINED PORTION (%) UNEXPLAINED PORTION (%) HUMAN CAPITAL VAR. YEARS OF WORK EXP. EDUCATION FAMILY STATUS MARRIED CHILDREN ALL OTHER VAR. TOTAL

11 SOURCES OF CHANGE IN GENDER EARNINGS GAP, , FULL TIME, NONAGRICULTURAL WORKERS, AGE Table 10.4, p. 383 SOURCE OF CHANGE IN GENDER EARNINGS RATIO CONTRIBUTION TO ABSOLUTE CHANGE IN GENDER EARNINGS RATIO TOTAL CHANGE.102 CHANGE IN SKILLS (“EXPLAINED”) EDUCATION WORK EXPERIENCE OCCUPATION/INDUSTRY/ COLLECTIVE BARGANING TOTAL.083 CHANGE IN REWARDS (“UNEXPLAINED”) EDUCATION WORK EXPERIENCE OCCUPATION/INDUSTRY/ COLLECTIVE BARGANING TOTAL-.065 CHANGE IN WAGE STRUCTURE.084

12 Estimating Wage Differentials As mentioned earlier we have discussed that just looking at the mean wage differences is not a accurate difference measurement The Oaxaca decomposition measures the difference accounted by some exogenous variables

13 Estimating Wage Differentials Now lets turn our attention to the how we can more accurately measure the difference in between two groups We will use: Male (Female), Hispanic, Black, Asian (White), North, South, West (Mid-West) as the dummy variables

14 Regression Earning = α + β 1 x Years Education + β 2 x Years of Work Experience + β 3 x Male - β 4 x Hispanic - β 5 x Black + β 6 x Asian + β 7 x North - β 8 x South + β 9 x West + μ

15 Regression Where after estimating the coefficients we obtain the following result: weekly wage = *(years of education) + 40*(years of experience) + 15*(Male) -75*(Hispanic) - 80*(Black) + 90*(Asian) + 60*(North) - 50*(South) + 40*( West)

16 Regression where Male= 1 if male, 0 if female Hispanic= 1 if hispanic, 0 otherwise Black= 1 if black, 0 otherwise North =1 if individual lives in the N, 0 otherwise South=1 if individual lives in the South, 0 otherwise North =1 if individual lives in the N, 0 otherwise

17 5 Different Average Individuals i) a White male, 12 years of education, with 5 years of experience, and living in the North. ii) a White female, 12 years of education, with 5 years of experience, and living in the South. iii) a Hispanic male, 12 years of education, with 5 years of experience, and living in the West. iv) a Black male, 12 years of education, with 5 years of experience, and living in the Mid-West. v) a Black female, 12 years of education, with 5 years of experience, and living in the South.

18 Estimated Wages Are: Individual 1: = *(12) + 40*(5) + 15*(1) -75*(0) - 80*(0) + 90*(0) + 60*(1) - 50*(0) + 40*(0) Individual 2: = *(12) + 40*(5) + 15*(0) -75*(0) - 80*(0) + 90*(0) + 60*(0) - 50*(1) + 40*(0)

19 Estimated Wages Are: Individual 3: = *(12) + 40*(5) + 15*(1) -75*(1) - 80*(0) + 90*(0) + 60*(0) - 50*(0) + 40*(1) Individual 4: = *(12) + 40*(5) + 15*(1) -75*(0) - 80*(1) + 90*(0) + 60*(0) - 50*(0) + 40*(0)

20 Estimated Wages Are: Individual 5: = *(12) + 40*(5) + 15*(0) -75*(0) - 80*(1) + 90*(0) + 60*(0) - 50*(1) + 40*(0)

21 Compare Wages Holding Other Factors Constant If We use Individual 1 as the comparison group, then: Individual 2 earns 71 cents to $1 of individual 1 (I.e. 310/435) Individual 3 earns 78 cents to $1of individual 1 Individual 4 earns 68 cents to $1of individual 1 Individual 5 earns 53 cents to $1of individual 1

22 Measuring Discrimination Gender Wage Ratio

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24 RESULT OF BLIND AUDITIONS ON ADVANCEMENT TO NEXT AUDITION ROUND Table 10.5, p. 389 PERCENT ADVANCED-PRELIMINARY ROUND BLINDNOT BLIND WOMEN28.6%19.3% MEN20.2%22.5% DIFFERENCE (% WOMEN ADVANCED - % MEN ADVANCED) 8.4%-3.2% DIFFERENCE IN DIFFERENCE11.6% PERCENT ADVANCED-SEMIFINAL ROUND WOMEN38.5%56.8% MEN36.8%29.5% DIFFERENCE (% WOMEN ADVANCED - % MEN ADVANCED) 1.7%27.3% DIFFERENCE IN DIFFERENCE-25.6%

25 RESULT OF BLIND AUDITIONS ON ADVANCEMENT TO NEXT AUDITION ROUND Table 10.5, p. 389 PERCENT ADVANCED-FINAL ROUND BLINDNOT BLIND WOMEN23.5%8.7% MEN0%13.3% DIFFERENCE (% WOMEN ADVANCED - % MEN ADVANCED) 23.5%-4.6% DIFFERENCE IN DIFFERENCE28.1% PERCENT HIRED WOMEN2.7%1.7% MEN2.6%2.7% DIFFERENCE (% WOMEN ADVANCED - % MEN ADVANCED) 0.1%-1.0% DIFFERENCE IN DIFFERENCE1.1%

26 Discrimination on The basis of Beauty Hamermesh and Biddle (1994) suggest that there is a selection criteria that seems to set “more attractive” people into job occupations where their “beauty” makes them more productive. For instance, jobs that interact with the public more

27 Discrimination on The basis of Beauty Averett and Korenman (1996) suggest that individuals with higher body mass index than the recommended range had lower wage than those with the recommend ranges. It is interesting that women had 15% lower wage and men about half that.

28 Discrimination on The basis of Beauty Averett and Korenman (1996) (cont.) Also, while men under the recommend range experienced earning penalties the women did not. Finally, obesity penalties were larger for White women than for Black women

29 RATIO OF BLACK TO WHITE FEMALE MEDIAN EARNINGS, YEAR-ROUND FULL TIME WORKERS, Figure 10.1, p % 100% 95% 90% 85% 80% 75%

30 PERCENT FEMALE IN VARIOUS CORPORATE POSITIONS Table 10.6, p. 396 TITLE% FEMALE CEO/CHAIR.52 VICE CHAIR.85 PRESIDENT1.71 CFO6.44 COO1.836 EXEC. VP1.58 OTHER CHIEF OFFICER2.66 SENIOR VICE PRESIDENT3.45 GROUP VICE PRESIDENT.81 VICE PRESIDENT4.27 OTHER OCCUPATIONS2.88

31 Is there Discrimination in a Name The Causes and Consequences of Distinctively Black Names By Roland G. Fryer and Steven D. Levitt NBER Working paper #

32 Black Name Index

33 Such that BNI = 0 if only White Kids receive this name BNI = 100 if only Black Kids receive this name

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