a. What is the wage gap between A-type and B-type workers, on average?

b. Using Oaxaca-Blinder decomposition methods, calculate how much of the wage differential found in part (a) is due to discrimination and how much is due to differences in skill?

c. The commission also uncovered evidence of discrimination in school admissions, such that B-type workers had more difficulty gaining years of schooling. If so, is part (b) understating or overstating the extent of discrimination experienced by B-type? (Circle the answer).

1. The government of Sunshiny was concerned that, on average, A-type citizens were earning more than the B-type citizens, who are a minority population. The congress commissioned a study to analyze the wage gaps. Using data on wages and the average years of schooling and experience, the researchers estimated the following regression separately for A-type and B-type workers to calculate the statistics on the returns to skill in the chart below. The regression is for individual i from citizen group c. WageiC=C+CSiC+CEiC+iC 1. The government of Sunshiny was concerned that, on average, A-type citizens were earning more than the B-type citizens, who are a minority population. The congress commissioned a study to analyze the wage gaps. Using data on wages and the average years of schooling and experience, the researchers estimated the following regression separately for A-type and B-type workers to calculate the statistics on the returns to skill in the chart below. The regression is for individual i from citizen group c. WageiC=C+CSiC+CEiC+iC