Premium
The Effect Of Statistical Discrimination On Black–White Wage Inequality: Estimating A Model With Multiple Equilibria*
Author(s) -
Moro Andrea
Publication year - 2003
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00077
Subject(s) - counterfactual thinking , economics , wage , wage inequality , econometrics , estimation , inequality , selection (genetic algorithm) , statistical discrimination , structural estimation , mathematics , labour economics , computer science , mathematical analysis , management , artificial intelligence , philosophy , epistemology
This article presents the structural estimation of the parameters of a statistical discrimination model. Although the model is capable of displaying multiple equilibria, an estimation strategy that identifies both the model parameters and the equilibrium selected by the economic agents is developed and empirically implemented. A comparison between the selected equilibria and the other potential equilibria reveals that the decline in wage inequality experienced in the U.S. economy cannot be attributed to changes in the equilibrium selection. Nonetheless, a counterfactual experiment shows that in a color‐blind society blacks' wage would have been on average more than 20% higher.