Racial Wage Gaps and Differences in Human Capital

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This paper uses the Cotton/Neumark decomposition methodology and 1990 CPS data to investigate the relative importance of labour market structure and human capital in explaining the white male/Asian, white male/black, white male/Hispanic wage gaps. We find that labour market structure is more important than human capital in explaining the white minority wage gaps. Moreover, most of the labour market structural effects are due to differential returns to white structural characteristics. Our result is robust to the specification of human capital. Our results contradict the results of research that indicate that the white/minority wage gaps can be explained solely by differences in the endowment of human capital. Our results have implications for narrowing the wage gaps between whites and racial minorities.



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