Question

I. Suppose years of schooling, s, and years of experience both affect earnings. The equations for the weekly salaries of white and black workers are given by: w 400100s, 50e, W 300 50s,+10e, On average, white workers have 16 years of schooling, black workers have 12 years of schooling and both workers have 20 years of experience. a. What are average earnings of white workers? Black workers? What is the average wage differential? b. What wage would the black workers earn if they were treated like white workers? c. Using the Oaxaca decomposition technique, calculate how much of this wage differential is due to schooling and experience. d. Using the Oaxaca decomposition technique, calculate how much of this wage differential is due to unexplained differences/discrimination.