Understanding Oaxaca Decomposition: Wage Gaps and Discrimination
School
Westminster High School**We aren't endorsed by this school
Course
ECON 101
Subject
Economics
Date
Dec 10, 2024
Pages
8
Uploaded by MajorTree15845
Interpreting Oaxaca decompositionEXPLAINED portion of the wage gap - part that can be explained by observable skill diffUNEXPLAINED - can’t be explained by skill— since can’t be explained by observable skill difference, sometimes interpreted due to discriminators— may overstate if we can’t observe the extent in our data between men and womenLABOR DEMANDFirm’s decision about how much labor to use = driven by desire to max profits{{{ q = f(E) }}}LIST OF READINGSWeek 11.“Introduction to Evaluations” CHARLES AND GURYANa.Steps on how to evaluateWeek 21."Prejudice and the Economics of Discrimination" CHARLES AND GURYAN2."How Gary Becker saw the scourge of discrimination" MURPHYWeek 31.Statistical Discrimination MORO2.Race and Inequality CHETTY3.When I See Racial Disparities, I see Racism NYTWeek 4Lecture 1❖Race, discrim, and ipods❖“Is there a Taste for Discrimination?❖Racial Discrim in the Labor MarketLecture 2❖Betrand Mullainathan❖Heckman Detecting Discrim❖Neal JohnsonWeek 5●Empirical Evidence on the Effects of Ban the Box Policies DOLEAC●10 Facts About CrimeWeek 6●Racial Bias in VR Courtrooms●Discrimination in the Age of Algorithms●When an Algorithm Helps Send you to Prison NYTWeek 7
●Roots of Gender Inequality in Developing Countries●Gender Gap in Math Test Scores NIEDERLE AND VESTERLUNDWeek 8●Affirmative Action and the Quality-Fit Trade OffWeek 11.Introduction to Evaluations CHARLES AND GURYAN○Random assignment to allocate resources, run programs, or apply policies as study design○Goal: determine if program has impact○Stories: can be basis for theory○Evaluationsinvolve developing hypotheses of what’s going on, and then testing those hypotheses○Who’s asking the questions?○Program evaluation can be associated w +/- sentiments, depending on whether itis motivated by a demand for accountability versus a desire to learn.■1. Needs Assessment■2. Program Theory Assessment ■3. Process Evaluation ■4. Impact Evaluation ■5. Cost-Benefit, Cost-Effectiveness, and Cost-Comparison Analysis ■6. Goals, Outcomes, and Measurement○EX. PPL frequently sick from drinking contaminated water… NGO purchases chlorine tablets and develops infrastructure for distribution to households1) Needs assessment■programs & policies introduced to address a specific need■identifying social problem, defining target population (to be “served”), determining service needed●EX. If pollution contaminating water is agriculture, investing in sanitation infrastructure won’t solve problem2) Program theory assessment■programs simultaneously navigate the capacity constraints (financial, human, institutional) & political realities of context■conceiving appropriate response —> policymakers implicitly make decision about what’s the best approach3) Process Evalutation
■implementation assessment or assessment of program process■analyzes effectiveness of program operations, implementation, and service delivery■used to benchmark success—> data collection mechanism must be in place to determine whether benchmarks are being met4) Impact Evaluation■use direct indicators●EX. # of ppl report suffering from diarrhea in last 2 monthsWeek 23."Prejudice and the Economics of Discrimination" CHARLES AND GURYANa.Becker model - relationship b/w prejudice and racial wage gapsb.racial wage gaps are larger the more racially integrated is a state’s workforce c.Since prejudiced employers sacrifice profits by discriminating, employers are ultimately driven from market in long run in a competitive settingd.Racial wage gaps are more closely related to level of prejudice of the “marginal” person in the distribution (than average)e.Model suggests holding prejudice in state constant is strongly negatively related to racial wage gapsf.If employer hires particular type of labor, does to the point where its MP = MCg.Prejudiced employers are shut down or out of market bc they sacrifice profit by remaining open and hiring more expensive whites4."How Gary Becker saw the scourge of discrimination" MURPHYa.Becker Model…i.Used a rational indiviudal, utility maximizing modelii.Based on idea of market, interaction b/w peopleiii.Used economic notion of an equilibriumb.Discrimination - consequences for people being discriminated and people engaged in itc.Black college grads avoided discrim by becoming professionals who served black communityd.Incentives existed for non discriminating employers to hire black workersi.Increase profits by hiring black > whitese.If enough nondiscrim employers entered the markets, they could eliminate wage differential b/w races (hire relatively cheap source of labor)Week 34.Statistical Discrimination MORO➢Theory of inequality between demographic groups based on stereotypes that don’t arise from prejudice or racial/gender bias
■Occurs when rational, info-seeking decision makers use aggregate group characteristics to evaluate relevant personal characteristics of individuals➢Discrimination may - agents’ efficient response to asymmetric beliefs➢EXAMPLES■Job attachment: cost of specific human capital investment... ●Since hisorically women have lower labour market attachment than men (leaving jobs to have babies and start family), employersmay have preference to hire male over female candidates■Highway police accused of searching cars drive by minorities more frequently than others➢DECISION MAKER■Rational utility maximizing agent engaged in perfecting available info■Has incomplete info about outcome-relevant individual characteristics■Holds asymmetric beliefs regarding average value of relevant variables across groups●Can be interpreted as stereotypes➢Two sources of inequality■Discrimination is agents’ efficient response to asymmetric beliefs■Discriminatory outcomes may display inefficiency (hiring more men although it costs more to be discriminatory towards women)5.Race and Inequality CHETTY➢RACE■Hispanic Americans●upward income mobility (across generations) slightly below whites●Potentially closing present income gap (with white Americans)■Asians●Immigrants - higher level of upward mobility than other groups●Parents born here - intergenerational mobility similar to whites●Difficult to predict trajectory on income■Black and American Indian●Substantially lower rates of upward mobility●Higher rates of downwardmobility◆Black children born to parents in TOP income quintile are almost as likely to fall to bottom quintile as they are to remain on top quintile➢Black-white diff gap entirely driven by diff in men’s income (not womens)➢Diff in family characteristics explain very little of black-white gap■Ex. parental marriage rates, education, wealth, and diff in ability ■Controversial: racial disparity might be due to innate ability●which DOESN’T EXPLAIN why there’s intergenerational gap for men but not women➢Both black and white boys have better outcomes in low-poverty areas ■but black-white gaps are bigger in such neighborhoods
➢Within low-poverty areas, black-white gaps are smallest in places with■low levels of racial bias among whites ■and high rates of father presence among blacks➢Environmental conditions during childhood have casual effectson racial disparity = black white gap is not immutable■Black boys who move to better neighborhoods as children have significantly better outcomes6.When I See Racial Disparities, I see Racism NEW YORK TIMES➢What are common factors black boys who stay rich/ upward mobile VS black boys who are poor / incarcerated■Black boys who did well (as white) = less discrim, low poverty rates, and larger share of fathers present➢Why is racism only explanation for this phenomenon? Why not cultural forces that leaves black boys with poorer time management skills?■Easy way out is to say something’s wrong with black boys… Either there is something wrong with our policies, or there is something wrong with black boys (or black people) ■So personal observations of individual behavior does NOT equate group behavior➢What about the inherited wealth of white boys?■Controlling for the key sources of wealth that most low- and middle-income families have doesn’t explain the black-white mobility gap.➢Comparing Men vs Women■Black men have much lower employment rates, lower high school completion rates and higher incarceration rates than black women and white men or women ➢Could lack of income gap b/w black and white women from same background be explained bc black women are less likely to get married than white?■Research compares income at individual + household level■White women more likely to get married = higher householdincomeWeek 4Lecture 1❖Race, discrim, and ipods DOLEAC AND STEIN➢Do buyers discriminate based on race?■taste-based : against race itself VS■Statistical: where raced is used as a proxy for unobservable negative characteristics➢Experiment: Selling ipods vis online photos■Each ad cointained photo of ipod held by: black hand, white hand, and white hand with wrist tattoo
●Tattooed sellers likely to face statistical discrim same as blacks and can be thought of as “suspicious” white control group■RESULTS: ●Black sellers received 13% fewer responses and 17% fewer offersthan white sellers.●The average offer received by black sellers is 2%-4% lower, despite the self-selected – and presumably less biased – pool of bidders responding to these ads.●The effects are similar for tattooed sellers, suggesting a role for statistical discrimination. Buyers corresponding with black sellers exhibited lower trust: They are 17% less likely to include their name in e-mails, 44% less likely to accept delivery by mail, and 56% more likely to express concern about making a long-distance payment.■Competition limits discrimination■Discrimination varies across the country■Buyers statistically dscriminate❖“Is there a Taste for Discrimination? BRYSON AND CHEVALIER (Vox)➢Two models of discrimination■Discriminated group ends up worse-off●Employers, employees and customers may have taste for discrimination●Hiring, working with, or being served by individual from discriminated group as psychic cost■Origin of gap in employment and wages b/w groups arise due to employers lacking info at individual productivity at point of hiring➢New test for taste-based discrim■Hiring decisions in online game based of Fantasty Footbal●Goal: hire 15 footballers to accumulate points●Employers are free to didscriminate●No statistical discrim b/c full info on producticity of each employee is disclosed■Results: employers dont discrim on grounds of race when choosing team,either in initial or through season❖Racial Discrim in the Labor Market➢“higher incidence of unemployment among blacks suggests to us that we require a model in which blacks are more likely to take jobs for which they turn out to be poorly suited”➢if firms have greater difficulty evaluating black applicants, it is plausible that they will prefer to hire whites and when they hire blacks will be more likely to have “made a mistake” ➢we have concluded that none of the existing models of race discrimination in the labor market explains the major empirical regularities
➢firms using affirmative action had a greater proportion of minorities in their workforce, showed greater willingness to hire minorities, and received more minority job applications ➢most controversial policy would set different hiring standards for blacks and whites, possibly through the use of quota Lecture 2❖Betrand Mullainathan➢Experiment: job apps w/ racial sounding namesi.White name yields as many more call- backs as an additional eight years of experience on a resume ➢Paper suggests that African-Americans face differential treatment when searching for jobs and this may still be a factor in why they do poorly in the labor market. ➢Job applicants with African-American names get far fewer call- backs for each resume they send out. ➢Equally importantly, applicants with African-American names find it hard to overcome this hurdle in callbacks by improving their observable skills or credentials.➢Taken at face value, our results on differen- tial returns to skill have possibly important pol- icy implications. i.suggest that training programs alone may not be enough to alleviate the racial gap in labor market outcomes. ii.For training to work, some general-equilibrium force outside the context ofour experiment would have to be at play. iii.In fact, if African- Americans recognize how employers reward their skills, they may rationally be less willing than Whites to even participate in theseprograms. ❖Detecting Discrim HECKMAN➢3 Main Pointsi.distinguish market discrimination from the discrimination encountered by a randomly selected person or pair of persons at a randomly selected firmas identified from audit studiesii.consider the evidence presented by the authors in the symposium ●Earning disparity in 90s due to dif in skills they bring to market, notdiscrimiii.Examine the logic and limitations of the audit pair method❖Role of Premarket Factors in Black-White Wage Differences JOHNSON➢Week 5Week 6
Gender DiscriminationWeek 7Jayachandran RootsMath and Gender●Although women outperform men in verbal skills, there’s still a performance gap in math 2:1○Could be because boys grow up with games that are more “movement oriented and therefore grow up in more spatially complex environments”○BUT Point of paper is not nature vs nurture… not why there’s necessarily a gap●Paper will examine results that suggest the evidence of a large gender gap in math performance at high percentiles (800 in SAT) may be explained by differential manner in which men and women respond to competitive test-taking environments○NOT by difference in skill●Evidence of a significant and substantial gender difference in the extent to which skills are reflected in a competitive performance●Response to gender difference in competitive performance●Week 8Week 9Week 10