Labor Economics 5th Edition by George Borjas

Exercise 7

After controlling for age and education, it is found that the average woman earns $0.80 for every $1.00 earned by the average man. After controlling for occupation to control for compensating differentials (i.e., maybe men accept riskier or more stressful jobs than women, and therefore are paid more), the average woman earns $0.92 for every $1.00 earned by the average man. The conclusion is made that occupational choice reduces the wage gap 12 cents and discrimination is left to explain the remaining 8 cents.
(a) Explain why discrimination may explain more than 8 cents of the 20 cent differential (and occupational choice may explain less than 12 cents of the differential).
(b) Explain why discrimination may explain less than 8 cents of the 20 cent differential.