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Wage Differentials, Discrimination and Inequality: A Cautionary Note on the Juhn, Murphy and Pierce Decomposition Method


Myeong-Su Yun


Tulane University; Institute for the Study of Labor (IZA)

Scottish Journal of Political Economy, Vol. 56, Issue 1, pp. 114-122, February 2009

Abstract:     
This paper shows how difficult it is to study the roles of discrimination and unobserved skills when studying changes in racial and gender wage gaps over time by examining merits and shortcomings of a popular decomposition method by Juhn, Murphy and Pierce (JMP). The JMP method shows that wage dispersion can offer a compelling explanation of the wage gap. However, JMP have to rely on a few strong assumptions in order to derive their decomposition equation, which introduces wage inequality as the price of unobserved skills (the standard deviation of the residuals) into their decomposition equation.

Number of Pages in PDF File: 9

Accepted Paper Series


Date posted: January 25, 2009  

Suggested Citation

Yun, Myeong-Su, Wage Differentials, Discrimination and Inequality: A Cautionary Note on the Juhn, Murphy and Pierce Decomposition Method. Scottish Journal of Political Economy, Vol. 56, Issue 1, pp. 114-122, February 2009. Available at SSRN: http://ssrn.com/abstract=1331702 or http://dx.doi.org/10.1111/j.1467-9485.2009.00475.x

Contact Information

Myeong-Su Yun (Contact Author)
Tulane University ( email )
New Orleans, LA 70118
United States
504-862-8356 (Phone)
504-865-5869 (Fax)
HOME PAGE: http://www.tulane.edu/~msyun/
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Feedback to SSRN (Beta)


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