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Labor Market Discrimination O R L D B A N K R E G I O N A L A N D S E C T O R A L S T U D I E S Unfair Public Disclosure Authorized Advantage Labor Market Discrimination Public Disclosure Authorized in Developing Countries m EDITEDBY Public Disclosure Authorized NANCYBIRDSALL AND RICHARDSABOT Public Disclosure Authorized / 2-/lq Unfair Advantage Labor Market Discrimination in Developing Countries WORLDBANK REGIONALAND SECTORALSTUDIES Unfair Advantage Labor Market Discrimination in Developing Countries EDITEDBY NANCYBIRDSALL AND RICHARDSABOT The World Bank Wasbington,D.C. © 1991 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W., Washington, D.C. 20433 All rights reserved Manufactured in the United States of America First printing December 1991 The World Bank Regional and Sectoral Studies series provides an outlet for work that is relatively limited in its subject matter or geographical coverage but that contributes to the intellectual foundations of development operations and policy formulation. These studies have not necessarily been edited with the same rigor as Bank publications that carry the imprint of a university press. The findings, interpretations, and conclusions expressed in this publication are those ofthe authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to the members of its Board of Executive Directors or the countries they represent. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is not required, although notification of such use having been made will be appreciated. The complete backlist ofpublications from the World Bank is shown in the annual Index ofPublications, which contains an alphabetical title list and indexes of subjects, authors, and countries and regions. The latest edition is available free of charge from Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Iena, 75116 Paris, France. Nancy Birdsall is director of the World Bank's Country Economics Department. Richard Sabot is professor of economics at Williams College and senior research fellow at the International Food Policy Research Center. Cover design by Sam Ferro. Libraty of Congress Cataloging-in-Publication Data Unfair advantage: labor market discrimination in developing countries / edited by Nancy Birdsall and Richard Sabot. p. cm. - (World Bank regional and sectoral studies) Includes bibliographical references. ISBN 0-8213-1909-4 1. Disctimination in employment-Developing countries-Econometric models. 2. Equal pay for equal work-Developing countries- Econometric models. 3. Pay equity-Developing countries- Econometric models. 4. Sexual division of labor-Developing countries-Econometric models. I. Birdsall, Nancy. II. Sabot, R. H. III. International Bank for Reconstruction and Development. IV. Series. HD4903.U56 1991 331.13'3'091724-dc2O 91-29951 CIP Contents Foreword ix Preface xi Introduction Nancy Birdsall and Richard Sabot 1 1. Labor Market Discrimination: Measurement and Interpretation T. Paul Schultz 15 2. Labor Market Discrimination and Economic Development Orley Ashenfelter and Ronald L. Oaxaca 35 3. Labor Market Discrimination in a Poor Urban Economy J. B. Knight and Richard H. Sabot 55 4. Discrimination in East Africa's Urban Labor Markets Jane Armitage and Richard H. Sabot 75 5. Earnings and Determinants of Labor Force Participation in a Developing Country: Are There Gender Differentials? Jere R. Behrman and Barbara L. Wolfe 95 6. Why Males Earn More: Location and Training of Brazilian Schoolteachers Nancy Birdsall and M. Louise Fox 121 7. Why Do Males Earn More Than Females in Urban Brazil: Earnings Discrimination or Job Discrimination? Nancy Birdsall and Jere R. Behrman 147 8. Job Discrimination and Untouchability Biswajit Banerjee and J. B. Knight 171 v vi Contents References 197 About the contributors 205 Tables Table 2.1 Occupational distribution in Tanzanian manufacturing by sex 40 Table 2.2 Occupational distribution in Tanzanian manufacturing by race 41 Table 2.3 Earnings differentials by sex 47 Table 2.4 Earnings differentials by race or caste 48 Table 2.5 Interaction effects of female dummy variable with selected explanatory variables for log earnings 49 Table 2.6 Interaction effects of race/caste dummy variable with selected explanatory variables for earnings 50 Table 3.1 Earnings functions for males and females 60 Table 3.2 Effects of discrimination and personal characteristics on the gross difference in mean wages between men and women 62 Table 3.3 Effects of occupational differences and job discrimination by sex 63 Table 3.4 Earnings functions for Africans and non-Africans 66 Table 3.5 Effects of discrimination and personal characteristics on the gross difference in mean wages between Africans and non-Africans 68 Table 3.6 Effects of occupational differences and job discrimination by race 69 Table 3.7 Coefficients on the race variable in occupation- specific earnings functions 71 Table 3.8 Coefficients on the race variable in earnings functions disaggregated by firm ownership 71 Table 4.1 Mean wages, levels of education and experience: Tanzania's manufacturing sector 77 Table 4.2 Earnings functions for Tanzania's manufacturing sector, 1971 and 1980 79 Table 4.3 Earnings functions for Tanzania's wage sector and public and private subsectors, 1980 82 Table 4.4 Actual and simulated occupational distributions: Tanzania's wage sector, 1980 83 Table 4.5 Predicted wages in Tanzania's public and private sectors 84 Contents vii Table 4.6 Earnings functions for Kenya's wage sector and public and private subsectors, 1980 86 Table 4.7 Form IV exam scores 89 Table 4.8 Wage functions: form IV or more leavers 91 Table 5.1 Sample breakdown by sex, region, labor force participation and reported earnings 97 Table 5.2 Means for major variables used in labor force analysis for national and three regional samples, Nicaragua 1977-78 98 Table 5.3 Labor force participation probit estimates for males and females in national and three regional samples, Nicaragua 1977-78 104 Table 5.4 Probits for reported earnings for males and females in national and three regional samples, Nicaragua 1977-78 108 Table 5.5 Ln earnings regressions with controls for hours and for double selectivity for males and females in national and regional samples, Nicaragua 1977-78 111 Table 5.6 Contributions of differential capital stocks to mean In earnings differential between the sexes with parameters for males and females in national and three regional samples, Nicaragua 1977-78 113 Table 6.1 Income and location of male and female teachers, 1970 126 Table 6.2 Mean characteristics of males and females 132 Table 6.3 Income equations: male and female teachers 133 Table 6.4 Income equations: male and female teachers 135 Table 6.5 Highest course completed, by sex and position 137 Table 6.6 Probit equations 139 Table 6.7 Probability of holding a secondary-school job 140 Table 6.8 Income differentials: male and female differences 141 Table 7.1 Percentages of males and females in labor force and mean monthly earnings, urban and rural Brazil 1970 150 Table 7.2 Distribution of males and females in labor force among job sectors, and mean earnings by sex and sector, urban Brazil 1970 150 Table 7.3 Education and potential experience of urban male and female labor force participants by sector, Brazil 1970 152 viii Contents Table 7.4 Percentage distribution among job sectors by family position for male and female workers, urban Brazil 1970 153 Table 7.5 Variable classification and descriptive statistics, urban Brazil 1970 154 Table 7.6 Probit functions determining work participation 160 Table 7.7 Earnings functions, urban Brazil 1970 164 Table 7.8 Impact on In earnings and on sectoral weights of replacing female characteristics and coefficients by male, urban Brazil 1970 165 Table 8.1 Occupational distribution of wage earners in Delhi, by caste and residential status for selected educational groups, 1975 175 Table 8.2 Mean values of earnings and characteristics of all migrants and of scheduled and non-scheduled caste migrants in Delhi, 1975-76 176 Table 8.3 Regression analysis of earnings for the entire sample 178 Table 8.4 Decomposition of difference in earnings between caste groups 180 Table 8.5 Coefficients and asymptotic standard errors for the multinomial logit model of occupational attainment: non-scheduled caste workers 183 Table 8.6 Full decomposition of gross earnings difference between scheduled and non-scheduled caste workers 184 Table 8.7 Regression analysis of earnings of all production workers and by caste 189 Table 8.8 Selected results in earnings functions for production workers in the formal and informal sectors, and in the public and private subsectors of the formal sector 191 Figures Figure 8.1 Earnings-experience profile, full sample 187 Figure 8.2 Earnings-experience profile, production workers 188 Foreword When government intervention in the markets of developing countries became pervasive, assessment of its consequences for efficiency and equity rose in priority on the World Bank's research agenda. That assessment contributed to reappraisal by policy makers of the wisdom of substituting bureaucratic control for market outcomes. That reappraisal has, in turn, helped shape the shift toward market liberalization in developing countries. Costs of intervention in excess of benefits do not imply, however, that free markets are free of imperfections. As market intervention declines, so research should increasingly focus on the imperfections of free markets and on low-cost means of ameliorating the impact of market imperfections.
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