INCORPORATING THE CAUSES OF OCCUPATIONAL DIFFERENCES IN STUDIES OF RACIAL WAGE DIFFERENTIALS

This study provides a basic framework for incorporating the causes of occupational differences into analyses of racial wage differentials. S eparating the influences of personal characteristics, occupational cho ice, and hiring discrimination on occupational attainment provides mea sures of the contributions of each to the racial pay gap. The paper al so considers the potential for bias in the wage-equation estimates ari sing from self selection into occupations. There are two general findi ngs. First, correcting for self-selection increases the importance of occupational distribution in explaining racial wage differentials. Sec ond, a proper accounting of the causes of these occupational differenc es yields discrimination measures that are higher than those that aris e when occupational dummy variables are included in the, wage equation s and all the difference in occupational distribution is treated as no ndiscriminatory.