WAGE DISCRIMINATION: REDUCED

FORM AND STRUCTURAL ESTIMATES*

ALAN S. BLINDER

ABSTRACT
Regressions explaning the wage rates of white males, black males, and
white females are used ta analyze the white-black wage differential among
men and the male-female wage differential among whites. A distinction is
drawn between reduced farm and structural wage equations, and bath
are estirnated. They are shawn to have very different implications for
analyzing the white-black and rnale-fernale wage differentials. When the
two sets of estimates are synthesized, they jointly imply that 70 percent of
the overall race differential and 100 percent of the overaU sex difIerentlal
are ultimately attributable ta discrimination of various sorts.

It is well known that, in the Amercan economy, whites earn much higher
wages than blacks and males eam substantially higher wages than females.
In view of the important role which inequality in wages plays in explaining
overall inequality of incames,1 iJ seems likely that the white-black and malefemale wage differentlals are major contributors ta the unequal distribution
of income in the United States. An understanding of these differentials,
therefore, is vitally important where quesons of incarne redistribution are
concerned.
The author s Assistant ProfessO! of Economies, Princeton University.

'"

1 owe a great deal to Robert E. HaU who fumished me with the data, assisted
wth camputational problems, and commented astutely on an earlier drait. l am
also indebted to Orley Ashenfelter, Yoram Ben-porath, Nicholas Barr, Ronald
Oaxaca, Ray Fair, A. P. Thirlwall, and a referee for ther he\pful comments.
Partial support under National Science Poundation Grant OS 32003X s gratefully acknowledged. [Manuscript received August 1972; accepted December
1972.}
Other research 1 have done suggests that roughly half of total incarne inequality,
as rneasured by the aini ratio, s attributable ta unequal wage rates. See [2J.

The JourJUll of Human Resources VIII 4

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It is known ,that part of each wage differential s due ta differences in

"objective" characteristics such as education and work experience, while
part remains even when whte~btack and male~female differences in these
tra~ts are controlled for. Hawever, the quantitative dimensions of the var~
ous causes of unequal wages are not weIl known. How much of the white~
black wage differential is attributable ta the superior education of the
whites? How much of the male-female differential is due ta the fact that
men have easier access ta the high-paying occupations? It is questions such
as these which this paper seeks to answer.
Section l be10w oudines the techniques l sha11 use to decompose the
two wage differentiais ioto their component causes, a simple technique
which is of quite general applicability. Section II discusses the unique features of the data source upon which this stndy is based. The distinction between reduced form and structural estimation, which is almost always
ignored in micro wage equations of the kind employed here, is drawn, and
methods for estimating each equation are discussed. Sections III and IV
report the results of ,applying these procedures ta the wage differentials
between white males and black males, and between white males and white
feroales, respectively.2 An Appendix provides the regression estimates up~
on which the results in Sections III and IV are based.
The main findings of this study are two: First, while the overall whiteblack and male-female differentials are strikingly similar is size, decomposition \Shows that the qualitative nature of race and sex differentials differ
quite radically. Second, whether we use structural or reduced form estimates of the wage equation greatly calors our view of the wage differentials.
For example, when we use the structural equations, the regressions suggest
that about 60 percent of the white~black wage differental is due ta the
whites' superor endowments of varions characteristics, leaving 40 percent
to be attrihuted ta discrimination of various kinds. By contrast, the reduced
form estimates attribute only about 30 percent of the raw differential ta
objective traits and 70 percent to discrimination.

1. THE DECOMPOSITION OF WACE DIFFERENTIALS

The most common way to study the dispersion in individual wages or
cornes is to estmate a regression like:

in~

(1 )

where Yi is the level or naturallogarithm of earnings, incarne, or wage rate,

2

Due to the sruaU samp!e sizes. no attempt was made to compare black males
with black fema!es or white females with black females.

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and Xli, ... ,Xni are n observable eharacteristics used to explain Y. If we

are particularly interested in comparing two demographlc groups (sueh as
whites and blacks), it makes sense ,ta estimate an equation like (1) for each
group:
(2)

(3)

where the H 'superscript indicates the high-wage group (a1ways white males
in tbis study) and the L superscript indieates the low-wage group (alter~
nativdy, white females and black males in this study).
Given (2) and (3), it is a simple matter ta compute the portion of
the differential eXplained by the regression: I ; f3r Kr - I i f3;
and the

Xr

amount whieh is captured by the shift coefficient, f30 _ f3o. The latter is
typically attributed to discrimination (see, for example [14], ch. 5). How~
ever, we can carry our breakdown farther tban this. The explained part of
the differential COrnes from bath differences in the coefficients, f3f and f3;,
and differences in the average characteristics, J(H and XL. In particular:

(4) L...J,
"'.f3~xl!
- L...J1
""'"'.{3LX~=
'".{3H(XIf
_XL) + '".X L(f1'!_[3L)
1 1
1
1
L...J1
1
1
1
~1 1 1
1
Here the first sum is the value of the advantage in endowments possessed
by the high-wage group as evaluated by the high-wage group's wage equation. 3 The second sum is the difference between how ,the high-wage equation
would value the characteristics of the low-wage group and how the lowwage equati.on actually values them. For brevity, 1 shall say tharl: .the tint
sum is "attributable ta the endowments," while the second is "attributable
to the coefficients." Note that the latter sum, which exists only because the
3 Any such breakdown of wage differentials runs into obvious index-number problems. For example, 1 could equally we!l have evaluated the differences n endowments by using the low_wage equation, i.e., by calculating
L

-H

-L

-:2-/3/ (Xi - Xi)

There is obviously no "right" and "wrong" answer here. My reason for adopting
the alternative procedure Is that the above formulation leaves as a residual:

=;f3H o

f3L0 +

~X~ (f3~-f3~)
1

~.(X~-X~)
1

(f1I!-f3.)
1
1

While we obviously cou!d label the first two terms as "attributable ta the coefficients," the interaction term has no obvious Interpretation. The breakdown
which 1 employ in the text, white in no sense theoretically "superior" to this, at
least has the advantage that each terrn has a ready economic interpretation.

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market evaluates differently the identieal bundle of traits if possessed by

members of different demographic groups, is a retlection of discrimination
as much as the shift coefficient is.
In surnmary, the measures we shall use in Sections III and IV below
are:
R = raw differential

= pao

+ :I.. f3N:
1

X~1 - (PL0

2:.

f3L:1 X~)
=
1

portion of dilIerential attributable to differing endowments

-H

-L

I. flf(X; - Xi)
i

C = portion of differential aUributable to differing coefficients

U
D

= unexplained portion of the diiEerential = f3~ - f3~

= portion of the differential attributable to discrimination = C

+U

11. DATA AND ESTIMATION TECHNIQUES'

The data bank on which the present study is based is the Michigan Survey
Re~arch Center's "Panel Study of Incarne Dynamics."5 This unique data
source has severa! important advantages over mast competing data sources.
First, because incorne variables inc1ude many diverse sources of nonlabor income and because earnngs variables confound differences in wage rates with
differenees in labor supply (which are themselves functions of wages), it
is imperative that studies 8uch as the present one use actual wage rates as
the dependent variable. 6 Most survey data generated by the Bureau of the
Census lack such a measure, which probably explains the paucity of empirical wage equatians until very recently. The Survey of Economie Opportunity (SEO) has, hawever, provided the micro data for a number of recent
regressian studies of individual wages (see, for example, [9, 4, 11, 10]).
4

For more details on the precise definitions of the variables employed here, and
a more thorough discussion of estimation problems, see the longer paper [11
upon which the present paper is based. It is available upon request.
5 For information on the survey techniques, collection, and processing of the
data, see [131.
6 For example, use of eamings data instead of wage rates can seriously bias esti_
mates of the real rates of rerum to education. Suppose, for example, that wages
depend on education and labor supply depends on wages. Then, estimating the
effect of education on e.afnngs will over- or underestimate the impact on wage.
rale.s according as the tabor supply curve is normal or backward-bending.

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The Michigan data have only a minimal advantage over ,the SEO in ,this
respect: ,the latter calculates the average wage eamed in the week previous
to the survey, while the fonner computes the average wage over the preceding year (1967). A more important advantage is that the Michigan data
provide a rich set of variables pertaining ta the individual's famiIy background. These enable us to estimate a meaningful reduced-fonn equation
which explains the wage rate ooly on the basis of characteristics which are
truly exogenous ta the individuai (such as his father's education). The SEO
is a much poorer source of family background data. 7 A third advantage of
the Michigan data is its superior treatment of union membership'-an important detenninant of earnlngs. The SEO follows Coosus procedures in
asking ouly Mngovernment workers whether or not they are members of a
union; thus govemment workers must be cither eliminated or treated as
nonrnembers. Since gnvernment employees generally earn higher wages
than private nonunion workers, the latter procedure would bias downward
the estimated union-nonunion differential. 8 The Michigan survey asked the
union membership question of every household head. Finally, the SRC
tape offers data on ,the length of time each individual has worked fOor his
present employer, thus giving us a direct measure of at least one part of the
individual's total work experience.
Of course, there are sorne seriaus shortcomings of these data as compared, say, with the SEO. Most important is the small sample size, which
makes the standard errors regrettably large in many cases. White the R 2 s
fram my wage equations are quite comparable to those obtained with the
SEO, the standard errars of individual coefficients are far larger. For this
reason the inierences drawn in Sections lU and IV are very tentative. 9
Pinally, the Michigan tape lacks information on the industry of employment, a variable often deemed ta be an important detenninanrt of wages. 10
To sharpen the estimates, 1 have selected a subsample from the SRC
tape for use in my wage regressions. First, ta elimina,te household heads
who may still be acquiring formaI education, 1 dropped from the sample aU
households whose heads we younger than age 25. Also dropped from
7
8

10

Recent work by Samuel BowJes suggests that this may be a serious omission, but
Bowles's work utili.zes income as the dependent variable. See [51.
My thanks ta Orley Ashenfelter for pointing this out ta me. This may be one
reason why the studies cited above 19, 4, 11, 10] ail find smaller union-nonunion
differentials than those reported here.
However, the procedures used to analyze the sex and race wage differentials
automatically give lower weight to the coefficients with larger standard errors.
Sa the analysis in Sections III and IV below may be more accurate than the
regression coefficients given in the Appendix.
Like many other data banks, the SRC panel study also lacks an ability variable.
However, some recent work by Gintis [7] and Griliches and Mason [8] suggests
that this may not be an important omission.

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consideration were hausehold heads who were neither black nar white or
wha did not work for money in 1967.
l have argued above that the proper dependent variable in equations
(2) and (3) is the hourly wage rateY But what of the independent variables? This, of course, depends on one's (tac~t or explLcit) madel of microeconomic wage determination. Most previous studies have been content to
list certain obvious oorrelates of wages and estimate the resulting regression
by ordinary least squares. But correlation does not imply causation, and if
we are interested in the latter, we ought to specify a more precise mode!.
The structural model whlch underlies the present study is the following:

(5)
(6)
(7)
(8)

(9)
(10)
(11 )

log w = f(Ed, Dcc, l, M, V, T, Z)

Ed = g(Dcc, V, B, Z)
Dcc = h(Ed, I, V, B, Z)
] = k(Oec, V, M, B, Z)
M = l(Ed, Oce, V, B, Z)
V,=. m(Ed, Occ, I, B, Z)
T = n(Ed, Dce, I, M, V, Z)

+ UI
+ U2
+ 14
+ U4
+ U5
+ U6
+ U7

where w is the hourly wage; Ed is a vector of six educational dummy variables; Dcc is a Set of eight dummes for occupation; J is a dummy for vocational training; M is 1 for members of unions and 0 otherwise; V is 1 for
veterans and 0 otherwisej T is a set of six dummies for tenure on the present
job; B is a set of 13 family-background variables; Z is a set of other exogenous variables; and t, g, h, k, l, m, and n are alllinear functions. In this
model, w, Ed, Dcc, I, M, V, and T are taken ,ta be endogenous, while B
and Z are exogenous. The elements of Z which enter the wage equation
with nonzero coefficients are age, health, residence, and local labor market
conditions.
While every reader can doubtless quarrel with some detail of this
specificatLon, the twQo most important features are relatively noncantroversial. Presumably, no one would wish ta exclude from the structural wage
equation any of the variables which 1 have inc1uded (though other investigators have added variables to the above list). The dichotomizatian of
variables intD endogenous and exagenous sets may quire sorne comment,
however, as it is rather novel in this context. In !/he intuitive model 1 have
in mind, each individual is presented with endowments nf hurnan and nonhuman capitals and at sorne point in his life-cycle, jointly decides how far
he wishes to pursue his formal education and ta what occupational strata he
aspires. Thus Ed and Occ, the two chief determinants of the wage rate, are
endogenous and simultaneously determined. This seems very much in the
11

Like most other nvestigators, 1 have actually used the natural logarithm of the
wage rate as the dependent variable.

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spirit of the human-capital-theory approach ta wage difIerences. Union

membership is endogenous because each worker may opt for a "union job"
at his discretion and because unions themselves may be selective about
whom they admiU2 Similar remarks hold for veteran status: sorne men
volunteer, while others are selected by a not-quite-random process.
Once this simultaneous-equations viewpomt is adopted, the estimation
problem seerns quite straightforward: Ideally, equations (5) through (11)
should be estimated as a simultaneous system by two-stage least squares or
sorne similar technique. Unfortunately, this is not possible because, as the
reader can verify, the wage equation is underidentitied. The only variables
omitted from (5) are the famly-background variables, B. And this identification problem is by no means res!ricted ta my particular model. Almost
any specification of a micro wage equation will have difficulty exc1uding
enough variables to identify the coefficients since these exc1uded variables
(family background in rny mode!) must be included in sorne other equation
of the system. That is, they must be important determinants of education or
occupation, etc., but have no direct impact on wage rates.
What can he done about this problem? ln this study 1 have adopted
two second-best procedures. The first is to estimate the reduced-fmm wage
equation:
(12)
logw = F(B, Z) + Vl
instead of equation (5), by ordinary least squares. This is rigorously correct,
and not without interest if we are concerned with the "ultimate causes" of
wage differentials rather than the mechanisms through which these causes
operate. Still, we would like tn get a look inside the "bl.ack box," ,that is, ta
get some structural information about equation (5). To do this we need
another, rather restrictive, assumption-that the error terros in equations
(6) through (11) are aIl uncorrelated with Ul. As the reader may readily
verify, if E(U1U2) = E(U1U3) = E(U,U4) = E(uJus) = E(UlU6) = E(U1U7)
= 0, thon the system is black recursive and ordinary least squares is the
hest linear unbiased estimator of equation (5).
In surnmary, we present ,{wo wage-equation estimates. The reducedform e&timates-which are always unbiased-are obtained by ordinary
kast squares estimation of equation (12). The structural estimates-which
are biased unIess the error terms are uncorrelated-are obtained by orclinary least squares on equation (5). Very roughly speaking, the structural
estimates cau be thought of as the condLtional expeotation of (the log of)
the wage, given the individual's present socioeconomic condition; and the
reduced form can be thought of as the condi,tional expectaton of (the log
of) the wage, given the circumstances of his birth.
12

1 have presented and discussed the results of estimating equation (9), the equation for union membership, in [3].

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Ill. ANALYSIS OF THE WHITE-BLACK WAGE

DIFFERENTIAL FOR MALES

This section breaks down the raw ditferential between white males and
black males into its component parts, using the procedures outlined in
Section 1 above. 13 The regressoo coefficients upon which the following
tables are based are provided in the Appendix.
Table 1 decomposes the overall 50.5 percent wage advantage of
whites in the manner implied by the structural estimates. One strildng re13

One question not considere.d in Section 1 was the choice of the control group.
For example, if a persan can fall into one of eight mutually exclusive and exhaustive occupational categories, then we have eght possible ways to choose
seven dummy variables to enter into the regression. My choices for the control
group are ail indicated in the Appendix. But a question arises as ta whether a
different choice of the control group would have altered my decompositions of
the wage differentials.
While it is difficult ta prove that this holds in an arbitrary regression using a
set of K qualitative variabLes with Ill(. classes in each, one can show that in the
simplest case of a single dichotomous classificatory variable, the choice of the
control group does not matter. Prao!: In this simple case, equations (2) and (3)
be.c.ome~

f3~ + f3~X~ +

(2')

(3')

Uf

y",
if group 2 is the control group. Under the alternative choice they WGuid be:

(2")

y~
,

(3")
My procedure is to divide the overaIl differential,
fi - f i

-L

yH _ l'L,

into

-fi-L

El ;:;::.f31 (X 1 - Xl) and Y - Y - El. Using the other group as control, we

would want instead E 2

have:

fi

f32

-fi

(X 2

-L

X 2)' But smce Xli

+ X 2; ;:;::.

1 for aIll we

And !rom the standard formula ror the estimated slope coefficients, we can show:

Sa Ez ;:;::. Et' and our dichotomization of the wage differential s the same for
either choCe or the control group.

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TABLE 1
STRUCTURAL ANALYSIS OF TH" WHITE-BLACK WAGE DlFFBRBNTIAL FOR MALES

Causal Factor
Age

Amount
Attributable
5.1%
-3.6
19.8
2.[

Aunount
Attributable
to
Endowments.
-0.7%
5.[
14.5
0.2
10.3
-0.4
0.5
-0.5
-0.[
0.5
0.3
0.7

AJnount
Attributable
to
Coefficients.
5.8%
-8.7
5.3
1.8
-8.9
-5.3
-2.5
-0.1
-0.6
0.5
-2.0
-36.9
C = -51.5%

Region of residence
Education
Vocational training
[A
Occupation
Union membership
-5.7
-2.0
Veteran status
-0.6
Healtb
-0.7
Local labor market conditions
Geographical mobility
0.9
Seasonal employment
-1.7
-36.2
Length of time on job
-21.1 %
Subtotal
E= +30.7%
Shift coefficient
u= +71.9%
Total
R= +50.8%
D = C U = 20.4%
Notes: A + sign indicates advantage for whites; a
sign ndicates advantage for
blacks. Components may not add ta totals due ta rounding.

sult is that the regression (ignoring the constant) actually accounts for a
21.1 percent differential in favo, of blacks. That is ta say, if black males
kept their current socioeconomic traits (including their less advantageus
distributions of education and occupation), and kept the same wage equatian as they now have but were given the shift coefficient nf the whites, they
would eam 21.1 percent more than white males. The .table also shows that
a 30.7 percent differential (about 60 percent of the total) can be attributed
to blacks' inferior endowments, in the sense that black wages would average
30.7 percent less than white wages if the former were given the entire white
wage equation. Closer examination reveals that the main reason why the
regression caUs for higher wages for blacks is that they gain more by having
seniority in their present jobs. The regression coeffidents in the Appendix
further show that just about all of this difference is accounted for by the
large gain in wages which accrues to black males from being in an occupation where tenure on .the job is applicable (as opposed to the self-employed
who were the control group). If this were ignored, :the regression (ignoring
the corutant) would predict a 15.8 percent advantage for whites, a rather
smaU difference.
Foremost among the factors contributing to the white maIe wage advantage is education, and the breakdown shows that most of this is due to

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the fact that whites have more education rather than to the hlgher rates of
return on education wbich whites also receive. The other main advantage
for white men is the more concave age-wage profile, a fact that bas been
noted in many studies of age-earnings profiles as we.Jl. Whites apparently
gain more than blacks from experience in the labor force, and therefore
they exhibit a more pronounced life-cycle pattern of wages.
Aside from tenure on the job, the most important factors favoring
black males are union membership and geographical distribution across
regions of the country. While blacks and whites are about equally likely ta
be union members, blacks gain much more from being in a union. The
regression coefficients show an average union-nonunion differenrtial of 39
percent for black males and 23 percent for white males. Bath of these are
larger than the ditferentials which have been estimated from the SEO (see
[9,4, Il, 10D. How much of tbis discrepancy is due to the superior data
on union membership (see above), how much is due ta omission of relevant variables fom the regression, and how much is due ta the absence of
interaction terms which allow the union-nonuruon ditferential to vary across
occupations 14 is an open question. However, the fact that Stafford's estimates [12], which used Survey Research Center data, are among the highest
obtained ta date lends SOrne credence ta the notion that differences in the
conceptual basis of the data may weIl he the reason for the high differentials.
As te the regional distribution, the fact that blacks are more heavily concentrated in the South (a disadvantage) s more than balanced by their
higher coefficients for each region (as compared ta the North Central
region which is the control group).
Interestingly, the distribution of workers across occupations-at least
at this relatively coarse levelof disaggregation--contributed oruy negligibly
ta the white-black differential. This would appear to fly in the face of casual
empirical observation, but in fact it does not. Decomposition of the meagre
1.4 percent occupational di:fferential in favor of whites reveals that the
superior white occupational distribution actually accounts for a substantial
10.3 percent wage advantage, most of which s neutralized by higher co14

Boskin [4], p. 470, suggests that ignonng the interactions between occupation
and union membership (Le., tuat unionnonunion differentia!s differ across occupations) resu!ts in a serious ove(eslimafe of the average unionnonunion differentia!. However, as Orley Mhenfeiter points out ta me, his reasoning 13 tlawed.
The figures in his Table 2 for union differentials in eaeh occupation ignore the
geographical area-union interactions which slso appear in his regressions. That
is, to his estimated uniannonunion differentials for eaeh occupation in Table 2
one shauld add the average (over an regions) of the union differential in that
occupation. That would (almost) always result in higher union differentials than
he presents. Indee.d, it is difficult ta see how a weighted average of the unionnonunion differentials (weighted by occupation) could differ much from the
overall average differentia! in the sample.

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TABLE 2
REDUCED l'ORM ANALYSIS OF THE WHITE-BLACK WAGE OlFFERENTlAL FOR MALES

Causal Factor
Age

Amount
Attributable
83,6%

Amouot
Attributable
to
Endowments
1.1%
8.8
0.5

Amouot
Attributable
to
Coefficients
84.7%
-9.6
5.1
8.7
16.9
-7.7
0.1
-6.6
3.9
-3.4
C = +92.2%

Regioo of residence
-0.8
Parents' incorne
5.6
Father's educaion
12.3
3.6
Place where grew up
-0.7
16.2
-6.6
Number of siblings
1.2
Health
-{J.9
-1.0
-6.4
Local labor market conditions
0.3
Geographical mobility
6.8
2.9
Seasonal employment
-2.5
0.8
Subtotal
E::::+15.2%
+107.4%
Shift coefficient
U:::: -56.7%
Total
R= +50.7%
D=C+U=35.5%
NOIes: A + sign indicates advantage for whites; a
sign indicates advantage for
blacks. Camponents May nat add to totals due ta rounding.

efficients for occupational advancement for blacks.

Table 2 portrays a similar decomposition based on the reduced-form
estimates. The results are strikingly different. When wages are explained
by clrcllffistances nf birth and other exogenous characteristics, the shift
coefficient (56.7 percent) DOW favors black men. The regression itself,
apart from the constant, actually accounts for a 107.4 percent wage differential in favor of whites, and most of this cornes from a superior wage
equation rather than from superior endowments.
The dominant factor favoring whtes is, of course, the age-wage profile. As white males mature from age 25 ta age 46, wage rates rise steadily
due ta past investments in human capital and to experience. Aiter that,
wages decline with age as training becomes obsolete and physical conditions deteriorate. Blacks also show a concave age profile, but it is much
less steep. Table 2 shows thalt these differing age profiles accunt for nearly
80 percent of the explained white-black wage differentiaI, and almost aU of
the part attributable ta the regression coefficients.
Not surprisingly, the nther major factors favoring whites are almost
ail family-background indices: parents' income, father's educational attainment, and the place where the individual was brought up (whether on a
farm, in a dt y, or in the South). What is surprising is that most of the advaniage fnr whites cornes from the coefficients rather than from the endwments. White6' superior endowments of these three characteristics can
explain only a 3.4 percent differential in their favor, while a 30.7 differential

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is explicable by the whites' more favorable coefficients. Blacks generally

gain less by having an educated father, lose more by coming from a poor
family, gain less by being born in an urban area., and sa on. The only
famly-background variable favoring blacks is the number of siblings.
While the size.s of black and white families are not very different, blacks
actually reap gains from having brothers and sisters, while whites sutIer
wage reductions.
Note that snce D ;:;::; 35.5 percent and R ;:;::; 50.7 percent in Table 2,
the reduced form attributes about 70 percent (that is, .355/.507) of the
raw white-black wage differential for men to the various dimensions of
discrimination, inc1uding discrimination in education and occupation. By
contrast, the structural equation, which measured oruy discrimination in
wage rates, attributed only about 40 percent ta discrimination (D/R =
.204/.508 in Table 1). Thus, we might tentatively break down th,e raw
difIerentiai as follows: 30 percent ta blacks' inierior endowments of exogenous variables (the ratio E/R in Table 2); 40 percent ta outright discrimination in rates of pay (the ratio D/R in Table 1); and 30 percent ta
discrimination in achieving the other endogenollS variables (such as education, occupation).
lt is perhaps of SOrne interest to compare these crude results ta Duncan's atternpt ta break down the black-white incorne differential for adult
males. 15 Usng a somewhat different specification and different statistical
methads, but a decomposition technique which is almost the same as mine,
he attributed 26.6 percent of the differential to farnily-background variables,16 35.6 percent -ta divergent attainments of education and occupatianal
status whch could not he predcted by farnily background, and ,the remaining 37.8 pecent ta discrimination in ncorne. This seems remarkably comparable to my raugh 30-30-40 percent breakdawn,17 especially in view of
the many dfferences between the ,{wo studies.

IV. ANALYSIS OF THE MALE-FEMALE WAGE

DIFFERENTIAL FOR WHITES
Table 3 utiUzes the structural regressons ta decompose the 45.6 percent
raw wage differential for white males over white females. The nature of this
differential is seen ta be radically different from the structural race differ15

Duncan [6], pp. 84 110. Specifically, his sarop1e was black versus nonblack males
aged 25-64 yeats who were in the experienced labor force and whose fathers
did not work on farms.
16 This groups "number of siblings" with the familybackground variables, as l do.
Duncan takes this to be an endogenous variable instead.
17 Of course, 1 have many exogenous variables aside from family background and
more endogenous variables than just education and occupation.

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TABLE 3
STRUCTURAL ANALYSIS OF THE MALE-FEMALE WAGE DlFFERENTiAL FOR WH/TES

Amount
Attributable
Amount
Attributable
Causal Factor
Ag,
87.5%
Region of residence
-0.9
Education
21.3
-3.5
Vocational training
-4.1
Occupation
Union membership
3.3
Veteran status
1.6
Health
2.0
Local Jabor market conditions
12.2
-0.9
Geographical mobility
Seasonal empLoyment
0.1
-4.7
Length of me on job
Subtotal
113.8%
Shift coefficient
U=-68.0%

Total
Note.s: A

R= 45.8%

Amount
Attributable

(0

(0

Endowments
0.2%
0.2

Coefficients

-0.4
-0.1
5.1
3.9
1.6
0.0
0.1
0.5
0.0
4.7
E = 15.7%

87.3%
-1.1
21.7

-3.4
-9.1
-{J.6

o
1.9
12.1
-1.3
0.1

-9.4
C=98.1%

D =C+ U= 30.1%

+ sign

indicates an advantage for males; a sign indicates an advantage

for feOlales. Numbers may not add to totals due to rounding.

ential. The independent variables account for a 113.8 percent differential

in favor of males on the basis of "objective" characteristics, leaving a 68
percent advantage for white females ta the unexplained shift coefficient.
Baking down the eXplained 113.8 percent further shows that unly 15.7
percent is due to inferior endowments, while 98.1 percent comes from
dfferent coefficients in the two wage equations.
By far the largest part of the differential is accounted for by the agewage profile. This is in marked contrast ta the structural differential between the races, where age profiles were not terribly important. In our estimates, white women exhibit an almost fiat (in fact, slightly convex) agewage profile-that is, their wages do nat show any .tendency ta rise over
the life cycle, whereas wages for white men certainly do. Thus, the failure
of women in the same education-occupation category to fise on the economic ladder over their working lives is seen to be the single largest cause
of the male-female differentLal among whites.
There are two further factors which place men at a distinct advantage:
education and conditions in the local labor market. In each case, the sexes
barely differ in their endowments; it is ,the coefficients that matter. Men eam
much larger wage increments for advancing to higher educational levels,

Blinder

449

and they are much less sensitive to loeallabor market conditions. 18

Notably absent from this list of factors explaining tbe male-female
differential is occupation. It has been widely held that the main way in
whicb women are discriminated against in labor markets is not in rates of
pay, but by being relegated to 10weT positions on the oceupational ladder
than their qualifications would merit (see, for example, [16, 15]). Yet Table
3 shows oecupational factors as contributing a 4.1 percent wage advantage
to white women. On doser examination, however, the apparent confiiet disappears. It is indeed true that men have a superior distribution across
occupations (accountng for a 5.1 percent wage advantage for men), but
the regre.ssions show that this is more than balanced by the greater gains
reaped by women when .they enter certain occup-ations (accounting for a
9.1 percent differential for women). Furthennor:e, p-art of the disparity in
age-wage p-rofiles mentioned above is surely a refl.ection of the failure of
women ta rise ta the higher occupational strata within any of the broad
occupational groupings.
Table 4 shows that endowments count for even less (essentiaIly zero)
and discrimination for even more when reduced-fonn estimates are applied
ru the sex differential. In fact, there are hardly any differences between the
reduced fmm endowmoots f white men and white women.
Once again the age profile dominates aIl other considerations, and it
nw accounts for the entire wage difference between the sexes. Embodied
in this reduced-fonn age-wage profile, of course, are any age-related differences in the attainment of the other endogenous variables, sueh as occupation, union membership, and job experience. Moot of the family-background variables operate in favor of the females, and mast of their impact
cornes through the coefficients. (Obviously, white women are bom in about
the same places ta the same kinds of parents and ~n famlies of about the
same size as are white men.) The regression coefficients show that white
women gain more from having educated fathers and from being brought
up in a city or in the South, and actually benefit (whle men lose) from
having poor parents and being raised on a farm. Other than age, the main
advantage accruing ta white men is tbeir reduced. sensitivity ta local labrn:
market conditions.
In summary, the regressions attribute none or the observed malefemale wage differentia1 for whites to differences in their endowments of
exogenous variables (E is about 0 ~n Table 4), about two-tltirds ta outright
discrimination in labor markets (the ratio D / R in Table 3), and about
one-third of the differential to discrimination in attaning other endogenous
variables sueh as occupational status and job seniority.
18

This last remark ought to be discounted heavily since our dummy variables are
very imperfect indices of local laboT market conditions.

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TABLE 4
RRDueED FORM ANALYSIS OF MALE-FEMALE WAGE DIFFERENTIAL FOR WHfTES

Amount
Amount
Attributable
Attributable
to
to
Coefficients
Endowments
1.0%
131.5%
4,4
0,4
-4.7
-0.7
-1.0
-8.5
-2.6
-12.2
-0.1
3.5
-0.1
0.6
15.5
0.0
2.S
1.3
0.1
0.6
E = -0.3%
c= 132.0%

Amount
Causal Factor
Attributable
Ag,
132.5%
Region of residence
4.S
Parents' income
-5.4
Father's education
-9.5
Place of birth
-14.8
3,4
Number of siblings
Health
0.6
Locallabor market conditions
15.5
Geographical mobility
4.1
0.6
Seasonal employment
Subtotal
131.7%
Shift coefficient
U= 86.2%
Total
R= 45.4%
D = C + U = 45.8%
Notes: A + sign indicates an advantage for males; a sign indicates an advantage
for femalell. Numbers may not add to totals due to rounding,

REFERENCES
1. A. S. Blinder. "Estimating a Micro Wage Equation: Pitfalls and Some Provisional Estimates." Princeton University Econometrie Research Program.
Research Memorandum No. 131, November 1971.
2. - - - . Towards an Economie Theory of Incarne Distribution. Cambridge,
Mass.: MIT Press, forthcoming 1974.
3. - - - . "Who Joins Unions?" Princeton University Industrial Relations
Section, Working Paper No. 36, February 1972.
4. M. J. Boskin. "Unions and Relative Real Wages." American Economie Review 62 (June 1972): 466-72.
5. S. Bowles. "Schooling and Inequality frorn Generation to Generation."
Journal of Political Economy 80:2 (May-June 1972): S219-51.
6. O. D. Duncan. "Inheritance of Poverty or Inheritance of Race?" In On
Understanding Poverty, ed. D. P. Moynihan. New York: Basic Books, 1968.
7. H. Gints, "Education, Technology and the Characteristics of Worker Productivity." Amercan Economie Review 61 (May 1971): 269-79.
8. Z. Griliches and W. M. Mason. "Education, Incorne and Ability." Journal
of PoUtica/ Economy 80:2 (May-June 1972): S74-103.
9, R. E, Hall. "Wages, Incorne and Hours of Work in the V.S. Labor Force,"
In Labor Supply and Incame Maintenance, eds. G. Cain and H. Watts.
Chicago: Markham, 1973.

Blinder

451

10. M. D. Hurd. "Changes in Wage Rates Between 1959 and 1967." Review of
Economies and Statistics (May 1971): 189-99.
11. R. Oaxaca. "Sex Discrimination in Wages." In Discrimination in Labor
Markets, eds. O. Ashenfe1ter and A. Rees. Princeton, N.J.: Prnceton
University Press, forthcoming 1973.
12. F. Stafford. "Concentration and Labor Earnings: Comment." American
Economie Review 58 (March 1968): 174-80.
13. Survey Research Center, University of Michigan. A Panel Study of Incarne
Dynamics: Study Design, Procedures, Available Data: 1968-1970 Interviewing Years (Waves I-Ill). Ann Arbor: The Center, 1970.
14. L. C. Thurow. Poverty and Discrimination. Washington: Brookings Institution, 1969.
15. F. B. Weisskoff. "'Women's Place' in the Labor Market." American Economie Review 62 (May 1972): 161-66.
16. H. ZeUner. "Discrimination Against Women, Occupational Segregation and
the Relative Wage." American Economie Review 62 (May 1972): 157-160.

APPENDIX
Tables A-l and A-2Iist, respectively, the structural and reduced-form wage
regressions upon which the analysls in Sections III and IV is base<!. C0efficients are presented oruy for white males, black males, and white females.
Results from estima-ting wage equations for black females and for the
pooled sample, with race and sex entering as dummy variables only, are
reported in the expanded version of this paper. lll
19

See fn. 4 in the text.

TABLE A-1
(Standard Errors)
(Dependent Variable: Natural Log of Wage)
White
Black
Independent Variable
Males
MM"
Constant
4.86
4.14
(.20)
(.45)
.0271
.0296
Ag'
(.0078)
(.0195)
(Age) 2
-.00029
-.00038
(.00008)
(.00022)
Region
Northeast
.061
.144
(.038)
(.107)
North Central
0
0
STRUCTURAL COEFFICIENTS

White
Females
5.54
(.64)
-.0110
(.0240)
.00009
(.00026)
.109
(.108)
0

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TABLE A-t (Continued)

White
Males

Black
Males

Females

South

-.107
(.038)

West

-,OIl

-.013
(.088)
.189

-.090
(.106)
-.006

(.042)

(.117)

(.113)

Law unemployment

-.024

High unemployment

.014
(.054)
-.168
(.097)
-,207
(.068)
.315
(.109)

-.246

(.031)
-,095
(.051)

,025
(.030)
.016
(.043 )

-.056

.032
(.100)
.230
(.162)

-.119
(.053)
-.081
(,038)

.004
(.103)
-.227
(.082)
.049
(,074)

-.183
(.131)
-.189

0
-,015
(.065)
.175
(.063 )

Independent Variable

White

Locallabor market

Low wage

.0lO

High wage

(.041)
.073
(,046)

GeographcaI mobility
Moved for job

Refused to maye for job

Healtb impediments
Obvious dsfigurement
Sorne work limitation

Sick recently
Education
0-5 years
6-8 yeaTS
9-11 years

-.013
(.050)

Sorne college
College graduate
Advanced degree
Occupation
Professional. technical

(.151)

.231
(.122)
.203
(.136)

(,135)

-.030
(.140)

.084
(.040)
.155
(.042)
.212
(.059)
.164
(,070)

.110
(.075)
.012
(.115)
.136
(,259)
.248
(.323 )

0
.179
(,227)
,247
(.128)
.022
(,109)
.187
(,119)
-.109
(.180)
.241
(,218)

.049
(.053 )

.159
(.174)

(.332)

0
.075
(,065)
,133
(.043 )

12 years

(.070)
.088
(.083 )

(.098)

-.255

.130

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TABLE A-1 ( Gontinued)

Independent Variable
Managers, officiaIs, proprietors
Self-employed businessmen
Clerical, sales
Craftsmen
Operatives
Laborers, service, farmhands
Farm managers
Union member
Veteran
Seasonal employment
Vocational training
Tenure on the job
Self-employed
Less than 6 montbs
6-18 montbs
10-42 months
4-9 years
10-20 years
Over 20 years

R'
s.e.
N

White
Males

Black
Males

White
Females

.124
(.049)
-.395
(.069)
-.085
(.049)
0
-.162
(.040)
-.333
(.053 )
-.719
(.076)
.228
(.032)
.029
(.028)
-.050
(.038)
.031
(.032)

.567
(.344)
-.019
(.214)
.011
(.115)
0
-.193
(.067)
-.123
(.067)
-1.051
(.213 )
.393
(.056)
.099
(.053)
.050
(.057)
-.069
(.061)

.133
(.354)
-.290
(.412)
-.024
(.305)
0
.014
(.309)
-.263
(.305)

0
-.085
(.065)
.025
(.069)
.020
(.060)
.056
(.045)
.078
(.041)
.081
(.044)

0
.393
(.139)
-.103
.122
(.089)
.020
(.073 )
-.001
(.068)
.082
(.081)

0
-.027
(.237)
.047
(.146)
-.075
(.129)
.189
(.119)
.024
(.[[0)
.125
(.151)

.498
.437
1239

.467
.466
467

.449
.465
[94

(.lO[)

.276
(.122)

-.055
(.107)
.147
(.085)

Note: Tne coefficients for education and tenure..on-the-job variables are increments
from advancing from one category ta the next higher one.

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TABLE A-2

(Standard Errors)
(Dependent Variable; Natural Log of Wage)

REDUCED FORM COEFFICIENTS

Variable
Constant
Age

White
Males

Black
Males

White
Females

4.75
(.22)
.0427

5.32
(.45)
.0110
(.0200)
-.0002
(.0002)

5.62
(.59)
-.0160
(.0250)
.00014
(.00027)

.130
(.119)

-.007
(.117)

(.0093 )
(Age) 2

-.00047
(.00010)

Region
Northeast

.080

(.050)

North Central
South

w"',
Local tabor market
Low unemployment

-.205
(.065)
-.024
(.053)

-.099

.015
(.040)

(.101)
.198
(.124)

High unemployment

-.087

Low wage

(.060)
.18
(.050)

.150
(.060)
-.082
(.104)
-.226
(.077)

.159
(.057)

(.118)

Higb wage
Geographcal moblty
Moved for job

.134

-.109
(.074)
.059

(.053 )

(.088)

-.201
(.066)
-.176
(.048)
-.028
(.062)
-.136
(.046)

-.018

.144

(.036)
Refused to move for job
Health mpedments
Obvious disfigurement
Sorne work limitation
Sck recently
Seasonal employment
Siblings
Number if

.400

-.003
(.009)

(.111)
-.216
(.090)
-.018
(.080)

.032
(.063 )
.013
(.013)

o
-.235
(.158)
-.104
(.120)

-.249
(.102)
-.319

(.159)
.369
(.132)
.165
(.141 )

.034
(.105)
.218
(.167)
-.189
(.131)

-.231
(.138)

-.053
(.149)
-.177
(.110)

-.012
(.023 )

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TABLE A-2 (Continued)

Variable
Eight or more
Father's education
0-5 years
6-8 years
9-11 years
12 years
Sorne college
College graduate
Advanced degree
Parents' economic status
Poor
Rich
Place where grew up
In the South
On a fann
In a city

R'
s.e.
N

White
Males

Black
Males

White
Females

-.071
(.059)

.050
(.074 )

-.153
(.157)

0
.090
(.055)
.163
(.067)
-.015
(.080)
-.143
(.095)
.228
(.125)
.082
(.176)

0
-.015
(.061)
-.055
(.125)
.109
(.171 )
.303
(.392)
.016
(0410)

0
.166
(.153)
.161
(.160)
-.012
(.186)
.178
(.244)
.282
(.276)
-.874
(.356)

-.012
(.036)
.060
(.054)

-.075
(.075 )
.033
(.107)

.136
(.092)
.041
(.111)

.045
(.059)
-.214
(.040)
.099
(.040)

-.177
(.090)
-.112
(.064)
-.017
C060)

.070
(.155)
.063
(.107)
.222
(.093 )

.200
.550
1239

.329
.516
467

.335
.500
194

Note: Coefficients for father's education indicate in.cremental impact of advancing

to next highest educational category.