Labor Economics 5th Edition by George Borjas

Exercise 21

Suppose that an additional year of schooling raised wages by 7 percent in 1970, regardless of the worker's race or ethnicity. Suppose also that the wage differential between the average white and the average Hispanic was 36 percent. Finally, assume education is the only factor that affects productivity, and the average white worker had 12 years of schooling in 1970, while the average Hispanic worker had 9 years. By 1980, the average white worker had 13 years of education, while the average Hispanic had 11 years. A year of schooling still increased earnings by 7 percent, regardless of the worker's ethnic background, and the wage differential between the average white worker and the average Hispanic fell to 24 percent. Was there a decrease in wage discrimination during the decade Was there a decrease in the share of the wage differential between whites and Hispanics that can be attributed to discrimination