Suppose the earnings structure for citizens and immigrants are respectively, and E = a + bcxc...

 

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Suppose the earnings structure for citizens and immigrants are respectively, and E = a + bcxc E = a + bX where E is earnings and X is productivity level. Subscripts c and i refer to citizens and immigrants, respectively. Assume that the citizen's earnings structure is the base. (Note, it is common to assume that the dominant group is the base group so unless you are told otherwise, it is best to keep the dominant group as the base. Dominant group is the one that it is believed there is no discrimination against them.) i. ii. Calculate the average earnings difference between the two groups. Use the Oaxaca decomposition and determine what portion of the average earnings difference is due to productivity differences and what portion is due to possible discrimination. Suppose the earnings structure for citizens and immigrants are respectively, and E = a + bcxc E = a + bX where E is earnings and X is productivity level. Subscripts c and i refer to citizens and immigrants, respectively. Assume that the citizen's earnings structure is the base. (Note, it is common to assume that the dominant group is the base group so unless you are told otherwise, it is best to keep the dominant group as the base. Dominant group is the one that it is believed there is no discrimination against them.) i. ii. Calculate the average earnings difference between the two groups. Use the Oaxaca decomposition and determine what portion of the average earnings difference is due to productivity differences and what portion is due to possible discrimination.