Question

Suppose years of schooling, s, is the only variable that affects earnings. The equations for the weekly salaries of male and female workers are given by:

W_m = 500 + 100s

W_f = 300 + 75s

NEED HELP ON ------C D E

C. Suppose that in 2019, women have surpassed men in educational attainment with women having on average 15 years of education and men having 14. What would the wage gap be, assuming the wage equations remained unchanged? (1 point)

D. How much of this gap is unexplained? Choose one of the two ways to calculate the unexplained portion of the wage gap. (2 points)

E .What else besides discrimination may contribute to this gap? (2 points)

Answer 1

Male Wage=500+100*14=1900

Female Wage=300+75*15=1425

Wage gap=1900-1425=475

The unexplained gap is 500-300=200 as we don't have any reason to know why the constant term in the wage equation should be different. The difference in the coefficients of the variable is taken into account by the difference in the years of schooling. SO the unexplained part is 200.

Other than discrimination, the wage gap could be due to the kind of jobs that males and females do. It might be that males work in more labor intensive or high-risk jobs and hence get higher pay.