ON DISCRIMINATION AND THE DECOMPOSITION OF WAGE DIFFERENTIALS

In this paper we examine four alternative methods for estimating the e xtent of labor market discrimination. All of the methods involve the d ecomposition of gross (unadjusted) wage differentials into discriminat ion and productivity components. These methods can be expressed in a s ingle generalized form and are shown to differ with respect to the imp licitly assumed nondiscriminatory, competitive wage structure. Equival encies among the methods are shown to exist under certain restrictive conditions. These methods are applied to micro data from the U.S. Curr ent Population Survey and from a specific U.S. firm.