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An economist performs an Oaxaca decomposition to quantify the degree of gender discrimination in the labor...

An economist performs an Oaxaca decomposition to quantify the degree of gender discrimination in the labor market. Let s be the schooling level of a worker. The salary of a male worker is given by wm = αm + βms = 70 + 10s. The salary of a female worker is given by wf = αf + βf s = 30 + 5s. The average schooling level for males is sm = 14, and the average schooling level for females is sf = 12.

(a) The wage difference between males and females due to skill differences is defined as βm(sm− sf ). What is the value of this term given the numbers above?

(b) The wage difference between males and females due to discrimination is defined as (αm − αf ) + (βm − βf )sf . What is the value of this term given the numbers above?

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  • Suppose years of schooling, s, is the only variable that affects earnings. The equations for the...

    Suppose years of schooling, s, is the only variable that affects earnings. The equations for the weekly salaries (W) of male (m) and female (f) workers are given by: Wm = 340 + 150sm [αm +βm(Sm)] Wf = 317 + 119sf [αf +βf(Sf)] On average, men have 14 years of schooling and women have 13 years of schooling. The Oaxaca decomposition formula is given as follows: ΔW = (αm – αf) + (βm – βf)Sf + βm(Sm – Sf) Where,...

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