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Wages, racial composition, and quality sorting in labor markets

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  • B. T. Hirsch
  • D. A. Macpherson

Abstract

This paper examines the relationship between wage rates and the racial composition of jobs, using large cross-sectional and longitudinal samples constructed from monthly Current Population Surveys for 1983-92. Support is found for a "quality sorting" model that posits an equilibrium in which the racial composition of jobs serves as a skill index of unmeasured labor quality. Estimation of standard wage-level equations shows that wages of both black and white workers are substantially lower in occupations with a high density of blacks. Consistent with the quality sorting hypothesis, the magnitude of the relationship is reduced sharply after accounting for occupational skill measures. Longitudinal wage-change estimates controlling for person-specific quality indicate little if any causal effect of racial composition on wages. Estimates of racial discrimination are reduced only moderately after accounting for racial composition; unexplained differentials occur within occupations or reflect inter-occupational differences uncorrelated with racial composition and occupational skill measures.

Suggested Citation

  • B. T. Hirsch & D. A. Macpherson, "undated". "Wages, racial composition, and quality sorting in labor markets," Institute for Research on Poverty Discussion Papers 1038-94, University of Wisconsin Institute for Research on Poverty.
    • Handle: RePEc:wop:wispod:1038-94
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    References listed on IDEAS

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    Cited by:

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    2. Mason, Patrick L., 1997. "Race, culture, and skill: interracial wage differentials among African Americans, Latinos, and whites," MPRA Paper 11329, University Library of Munich, Germany.
    3. Neuman, Shoshana & Oaxaca, Ronald L, 2004. "Wage Differentials in the 1990s in Israel: Endowments, Discrimination and Selectivity," CEPR Discussion Papers 4709, C.E.P.R. Discussion Papers.
    4. Barry T. Hirsch & David A. Macpherson, 2004. "Wages, Sorting on Skill, and the Racial Composition of Jobs," Journal of Labor Economics, University of Chicago Press, vol. 22(1), pages 189-210, January.
    5. Holzer, Harry J. & Reaser, Jess, 2000. "Black Applicants, Black Employees, and Urban Labor Market Policy," Journal of Urban Economics, Elsevier, vol. 48(3), pages 365-387, November.
    6. Edward J. Schumacher & Marjorie L. Baldwin, 2000. "The American with Disabilities Act and the Labor Market Experience of Workers with Disabilities: Evidence from the SIPP," Working Papers 0013, East Carolina University, Department of Economics.

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