Is Labor Market Information Better for Some Demographic Groups?

The evidence from the preceding sections suggests that labor market information problems may partially account for the lower wages paid to minority workers, among both women and men. This subsection turns to the question of whether employer information is better about some demographic groups than others. If mismatches lower productivity, then worse information about women or minorities can lower that group’s average wage, providing another channel for labor market information to lead to lower wages for such groups. In addition, even if the type of test from the preceding section does not point to information problems as a source of unexplained wage differences between equally productive workers in different demographic groups, the test in this subsection can. This is potentially most pertinent to sex differences in wages, which cannot be explained as stemming from simple statistical discrimination, given that women’s performance ratings are on average at least as high as men’s.

The analysis initially proceeded by estimating the wage equation separately for each demographic group. However, for some of the smaller groups the estimates of a (particularly the OLS estimates, but one IV estimate as well) were negative. Consequently, the estimates are computed for two comparison groups, men versus women and whites versus non-whites. Since the latter results in pooling men and women, for whom different instruments appeared to perform well, estimates for this comparison are reported using first just the age variables, and then the age and education variables as instruments. The results are reported in Table 6.