Male interracial wage differentials: competing explanations

Abstract

Persistent interracial wage differentials present a challenge for neoclassical models of discrimination, which claim that long-rung competition is not consistent with persistent discrimination. This study provides an empirical examination of the missing variable and job competition models of interracial wage inequality. The results argue strongly against the missing variables approach and strongly in favour of the job competition model. Specifically, this study finds that about one-half of the male African American-white and Latino-white interracial wage differentials are due to market discrimination against African Americans and Latinos. In addition, the positive and significant coefficients on the race-gender employment-density variables strongly affirm the job competition model's contention that access to white (especially) male-dominated jobs increases an individual's wage rate - regardless of race. Racial job segregation, then, is an important explanatory variable for racial wage discrimination.

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