Suppose that two wage regressions are estimated for black and white workers: Wa= 5.0+ 0.10S and...

 

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Suppose that two wage regressions are estimated for black and white workers: Wa= 5.0+ 0.10S and Ww=6.0+ 0.145 where S is the number of years of schooling. The average years of schooling for blacks and whites, respectively, is 12.2 and 13.6 years. a) (5 points) Draw the respective wage profiles for black and white workers on the same graph. Indicate the raw wage differential for the average black and white worker. b) (10 points) Calculate the Oaxaca decomposition. Indicate on your graph in (a), the portion of the wage differential attributable to skill differences between white and black workers and the portion due to labor market discrimination. Suppose that two wage regressions are estimated for black and white workers: Wa= 5.0+ 0.10S and Ww=6.0+ 0.145 where S is the number of years of schooling. The average years of schooling for blacks and whites, respectively, is 12.2 and 13.6 years. a) (5 points) Draw the respective wage profiles for black and white workers on the same graph. Indicate the raw wage differential for the average black and white worker. b) (10 points) Calculate the Oaxaca decomposition. Indicate on your graph in (a), the portion of the wage differential attributable to skill differences between white and black workers and the portion due to labor market discrimination.