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Homework answers / question archive / Economists A, B, and C are using different empirical approaches to empirically study the gender wage gap
Economists A, B, and C are using different empirical approaches to empirically study the gender wage gap. A looks at the difference in the average hourly wage that is paid to men and women. B uses a regression approach and controls for years of education. C uses a regression approach that controls for years and education and occupational dummies. It is known that women have on average more education than men and are employed disproportionately often in occupations that pay low wages. The economists study wage discrimination in a country where education of both men and women is fully founded by the government. Journalists Ji, J2, and J2 comment on the research of A, B and C. J1: "All three economists will measure a similar wage gap (up to estimation error)" J2: "Only A is measuring the true effect of wage discrimination." J3: "We should not forget that there is discrimination that makes it difficult for women to enter some high paying occupations. Only C is measuring the true effect of wage discrimination." Critically reply to the comments by the journalists. • Answer using complete sentences. • You can write an essay or organize your answer using bullet points. • Your answer must not exceed 4000 characters including spaces. Your answer should contain the following: 1. (7 points) An intuitive explanation of what it means to "control for a variable" 2. (5 points) A statement and explanation of the expected differences in the magnitudes of the wage gaps estimated by A, B and C. 3. (5 points) An explanation why J2 may be wrong. 4. (8 points) An explanation why J3 may be wrong.
Controlling for a variable refers to the consideration of a variable as an explanatory factor in a situation. To study gender wage gap, a few variables that have been taken into consideration as explanatory variables for gender wage gap are years of education, occupational dummies to incorporate the fact of gender discrimination.
The statement by journalist 1 that all economists are going to have a similar measure of wage gap is not true. Looking at the average hourly wage alone cannot explain much about why there is a gender wage gap. Again incorporating occupational dummies over and above the years of education adds a lot of meaning to why wage gap can occur based on gender.
The estimation by J3 is expected to have the least standard error followed by J2 and J1. This is because incorporating relevant explanatory variables leads to greater explanation and a better fit of the model. J2 and J3 both can be wrong because they do not incorporate years of work experience. Greater experience adds up to wages.
