Labor market discrimination in a poor urban economy

World Bdnk Reprint Series: N u m b e r 262 1. B. Knight and R. ti. Sabot Labor Market Discrimination in a Poor Urban Economy Kc.pr~ntc.dw1tt1 pcmrrn1-1~tnfrcvn~/~~rrrrr~rll)i.ilr.li~/trrrc.trl.';!rtilrc,c, vol. 19, no. 1 (October 01 I O H 2 ) . pp t > ; -37  World Bank Reprints So.227. Jt,hanntss I:. Linn, "The Costs of Urbanization in Developing Coun- tritws," Ei.t~trottric.I)t.r~c~lolittrc~~r/li C~tllrtrr~.'Clrr~trgc r r t r S o . 228. G u y 1'. I'ft~fft*rm.inn, "Latin America and the Caribbean: Economic Pt~rformancc-a n d Policic-s," S~rrrt/rrr~r~.lrrtrRczpictc~of Motrngc~trrcirlatrd Ect~trottric-5 No.229. Avishay Dravc~rmanand Joseph E. Stiglitz, "Sharec.ropping and the l n t c r l i n k i n g of Agrarian Markets," Attrc*ricntr Ecorrot~ricRczlictc~ So. 230. A b d u n Noc;r, " M a n a g ~ n gAdu:t Literacy Training," Prosyccts S o . 231. P:.la Balassa, "Shifting Patterns o f World Trade a n d Con.?etition," Pdo. 232. Johannc~sRisschop, W i l f r r d Candler, J o h n H. Duloy, a n d Gerald T. O'Mara, "ThP Indus Rasin Modcl: A Special Application o f Two-Level Lincar Programminq," Ma//rrttralical Pro,qrattrtrritrg Strrdy No. 233. Keith Bradley a n d A l a n Cirlb, "Motivation a n d C o n t r o l in the Mondragon E x p ~ r i r n ~ n t ,a"n d "'The Replication a n d Sustainability o f the M o n d r a g o n Expc~riment," Britislr \orrrrral of Itrdtistrial Rclntiotrs No. 231. Gary P. Kutctii*ra n d Roger D. Norton, "Operations Research Methods in Agricultural Policy Ani~lysis," Eurollcatr \,;~rrrrral of Oycmliotral Ki..ri~rrrclr N o . 235. I h l a Dalassa, "Economic Rcform in China," Baircn Nnziotralc dcl Lazporo Qrtrrrt ivrly .Y~~l~ic,tc~ N:). 236. S. van Wijnhcrgc-n, "St.igflationary EHvcts o f Monetary Stabilization I't~licic*~:A Qu,lntitativc- Analysis o f Soutli Korca," /orrr:.aI of Dcrlclolj- ttIl.tl1 \:~.~ttlitttl;i.~ N o . 237. Gcrr.hon I:cdcr, K i c h ~ r dJust, a n d K r ~ u dRoss, "l'rojccting Debt Servicing Capacity o f I>cvt-loping Countr~es,."\orrrtral of Fittntrcial atrd C)lrrrtrlit111IIV A trrrly>i.; No.2.18. I<ichard 11. C;olilm,l~\ and 1.~11Squire, "'Ti~c:inical CI!angt., Labor Use, ,)nil In..orncm I)istribut~onin ttic hiutl,~I r r i g i ~ t i o nProjcct." C~.ottottric I~r.rl~~icll~r~rrcr.trtiriICrtl!rrrrrlClrtrtrgi* S o 2 j. hlich.~c~l I:ingi~,"'Tr,iilc ,~ntthe Structure o f Amer~canIndustry," l /\trtrrr/\ 111~ l r i .I l t t ~ i ~ r t c ~ r ~ t r Ai.r~tlt.ttryof I'i)lrtic~rrlatrd Social Scic-trc-1. No 2.10 ' I),lviil M C; fJrwbi*ry ,lnd Josrph I..Sliglitz, "Optimal Commodity Stoc h - p ~ l i r ~I<ul g c b 5 , " O i \lnrri l'~.ot~:*ttr~~.lp~iltl=r,s No 2.11 l\c*l,~I\,I~,I\\,I, " l ~ i ~ ~ ~ i ~ t ~AILII?~515tin InJit ~ v v I o ~ ~li~ncgt ) ~ i o t ~ ~Ainc ~ s : i l i l r i ~ O ~ e * r v ~ c ~ w , "IVrrrltl l)r~r~c~litlttttc~trt St) 1.12 '1' N Sriniv,~\.~ri,"<;c~.~l!r.llI'quilibrium 'Thcbory, I'rojcct ifv,iluation, . ~ n t lI:cx)~iomicI)c.vc.l.~prnc*n~," 'lki. T/tc.ilr,v ntrd C.~pcric-rrc-c*of E~-otrc~?tric- I~r~l~l~ll~/lttll~tll So 2.43 I:mm,~riirt~lJirnclnt-/, "'I'Ii(.V,iluc~ol' Squatter I>wclIings in Dcweloping- <'ountric~s," I4 otr~:ttttc I) c ~ ~ ~ r ~ I i ~r ~r ~ c'rtltrrralt ~Chnn,qca t t r l t i r l ~ ~ SIB 24.4, lL)r14 I'le.~hovic , ~ n dMarj.~n1)olc-nc, "Hc~gion.il I>cvi*l(~pnicnti n a Soi.i,~li\l.I)c*vi*Ii~lting, .III~ hli~Itiri,~tion.~lCountry: The. C'.isc- of Yuffo- \I.IVI.I," 1tr!1*1tr ~ r ~ t t ~ r r t r l R~.~qrtlrraI .Si.rl,tr[.l. R~*r*tl*~l-  Labor Market Discrimination in a Poor Uiban Economy hj. J. H. k":i,qltf* cirtel R. I / . Subor** Luhor rrttrrkrl tli.\c-rrrrrirrtr~ic,rrhj. .stl.u trr~ilh~ relic1 irr u poor rtrhur~ cpcorrc~r,!,. is t;rrul~~:c~tlrc.\irr,qu .$lrrrclj. of rr~trrrr~/crc~/uriryc,nrp/oj.c.cls irr 7irrr:unic;. Tlrrrc*tireplurge~ciiffc~rc~rrcc~sirr rrrc9crrl11trgcpsh?. hot11sc.u urrd rut.',. C'.\ing~c~c.lrrriqcrc,.vprc~~~iorr.vlj~ trpplic,t/ to cir~~c~lope~tlc~orrrr/ric~.u, is it /i;urrtl /Irc;l. \I lrrrc~us//I(* \c3.rtli//i,rc-rc.r irr rrrcSerrr11tr.qcbsc.clrr he c~.upluirrc~d rrrirr~rl~~irr /t,rrvr.v o/.cc~.vtli/ic~rrrrc.t,.\rtr pc,r.vorrc;l c /rtrrc~c~/t~ri.c/ic.s.//re1~ . c ~ r c ' tlrf~i~rc~rrci~is rrrtrirrl!~ /Irc~rc~.\ctl/q/ wtr,qcl crrrtl /oh tli.vtritrrirru/ron. .4n trr/t.r~rl)/i.r rrrtrtk, to tJ\-pltrirr11rc. rc~srel/.v.IIhit 11rrtrr i-rbror/c8r/(I c,orrrr,rorr prc~.\~r~~l~u.\r/rorrstrl~ort/cli.\e ri~trirrtr~iotr. I.I?.1RC)l)L'C' 1If)% D i s r ~ r i g u ~ \ h ~kntg~ c c r d~lrcrc:nccs i n earnings u h ~ e hi;rn bc ju5tificd o n i cffic~cnc.!. gr~)untisand how ~ h l c h t. y rnih;rlloc;~ting Ii~hor.;rrc inclliCicnt is rclc\:rnr t o the clch;rtc. tiolly ctrntcstcd In ni;rriy clcvcl~~pingcountries. over NH~C,,p ~ b l ~ i !~.I c c o r d i ~togt h ~diht~nction.govcrnriicn: intcr\cntions t o :tIrcr i \ the clrrntnph \rructurc o n q u i t ) ::.rounds ni;r!. cithcr Ir:ipro\c or \rcrr\cn ~ l l o c ; r t ~ \cliic.icnc.!. c I)! I;~horrn;lrkct dl\crirnin;rtion rt i\ gcncr;~llyrnc'.Int that urlnc \rork.crs ;ire ~,IIJ Inorc th;in orhcr\ trirh the \.lnic cndo\r.rncni ol' prod!~c.t~\cccor:olnlc cti;~r.lc~cri\ticihy \irtuc I)!'\omc nari-ccononiic pcr- son;\l c h ; ~ r ; ~ c t i ~ r ~Thet ~ctl\tcnc.c ol' tll\crirliiti.~~~on1nipllc.5 [hilt pcncrrl- . ~ c . mcrll\ ti.~\c;Irl ~:ppt~rt~rlill!.\iniult;~ricou\ly 10 I n i l v o \ c the cl~\trihutlonof' In!ustl~,ccrl Ji\cr1ni1ri;111or1 ti.r\ \purrcci rile cro\rth ot c.l\rl :~ghtsniovcnicnts and 01' rc.nrctll;~lgo\crnrlicnt Icp~\l:rtion ~n tlic ~ridu*trr;~ll/c.J\oir;ll d c l ~ i o c - racic\ l ) ~ \ c ~ r ~ t ~ i ~ rI\i .t~t \i ~~ o n lrTi~)orl;1rit l ~ o l ~ t r cI\\LIC~ l lrrc\pcct1\c of' tkc ~,111\ ~ . c ~ \ t 11\ t~iipo*~.\or IIT~~IIL.,III~~I~\f.or ttic , I ~ \ I I I ~ ~ I I~I (~~~I ~I I ~ L ~ o I I ~ ~ Dc\pitc ttic ~ O ~ I Lr}~ * l c \ . ~ ~ i c ~ c 01 IIICptiCr~tir~icr~otipu1r ~xlL~r*.trlc\.~i~\~~r~n~~1i;ihi.~ti(>ri 111 r tKcn rliorc II~I~II\I~L~I! \I~ILIIC<I~ ~c ~t li t ~ r ~ l.r~~rpc~~-~,lL>. 111 r , I L I \ C t>f'tlic1.1ck ol' appropr I;IIC ~I;II,I - In [ti!\ p.tpcr ~c .~i)pl! IO ~ l c t . ~ ~ l c ~1';t~r:i t1.1l.1 I;III/.II)I,I [tic r~ch \~ti.itIn Countr~c\!i.~\cL,otrlc 11) he \tic ~ ~ ~ I ~ \ ~ I ~lool\ I ~.iri.11!\1\ I I O , I I 01 d l \ c r ~ n i ~ n ; ~ - d . ) l ' lion rtic (1.11.1 \el \re LI\C. \\.I\ g ~ * n c r . ~ kh!d .I 1'171 c ~ t ; ~ b I ~ ~ t i r r i c ~ i t - h\Llr\c!.c l - ; ~ \ c or \llr~ic 1.000 r.~ric!oi~i!! ~ ~ * l c ~ ~rt~rI,~-r\111 t c d I ,III/.I~I,I.\ ~ i i ; ~ ~ i ~ ~ V ; ~ e t ~ ~ r i r i g Wctor. \~CCI;III!. dc\~gticdh! one I,,,I\ t > ft t ;ILII tior\ L ) I L ~thc ( ~ c ~ i c i c ~iriictticc ~ ~ U ~ ~ . II * ~ h oVorcc ~.II,I ptlor ~ o ~ ~ l i ~kr rti~ctip r c t ~ l t ~t ldc t~; ~ ~ l ~,~*ri(;i~l!\i\ r 111 l c \ o f ~ ~ ~ C I I ~ ~U~,x..tr~hL I I : C * I I ) ~ . I I I ~ + . C ~ : I I!ic \Va,rlal li.~t!h.\\,I.),II;!I,~~~ 1 ) t  68 THE JOURSAL OF UEI'ELOPS!EST S T L ' D I ~ . %age\tructurcs and of uhat rhey rewal about rhc determinants o f wages and the functioning o f I;~hormarkets.' Our concern is trlth dibcrimination by brn and by racc. Our results arc \urpris~n\r.They run counter t o t\r.o Lommon presumptions about discrimi- nation. One is t h a ~de\clopmcnt can hc c\pccrcd t o hringchangci i n atritudcli and in\titurior,s uhich diminish arbitrary disad\.antages intlictcd o n \somen hy sex Jiscriniination in ;;.. labor marhct: such discrimin~tionis found t o bc f;ir \m;~llcrIn T;~n/an~ahan i n r he Unircd States. The or her prcsumprion i\ r that racial Jiscrimin;irion 1s practised c~thcrb y a majorily group with poucr g gain st a minority I;irk~np\uch putrcr or i n somc instances such as South ,.lfrica b y a minority againsr ;i rclati\.cly poir-erlrss majority: u c tind evidence t'or T;~n/~lni;lo f discrirninarion i n fa\or o f the non-African minority group uith apparently l~mitcdpo\vcr. Scr.r;on I1 outlines the merhg~ds\be employ ro a n a l y ~ clahor markc1 di\crl~ninationi n Tanlania. Section IIIaiwsscs the cntcnt o f sen discrimina- tion arid Scction I V rhc cxrcnt o f racc discrimination. I n Section V \re drau out borne o f rhe irnplic;~lion\o f ijur tincling. Our aim I..to dccornpox (he Jilfcrcncc I n nican \\ages hcrirccn rn;ilci and li.rn;\lcs or hcruccn Africans and non-Afric;ins into the component 'cxpl;i~ncJ'hy diITer~.nccsi n econornic charactcrisrics beluc.cn [he rtro groups ;~ndthe 'uncxplainccl' coniponcllt \ \ h ~ c hcan hc regarded as rcflccring rhc cxtcnt of labor marker di\crirnin;irion. N'lttiin rhc unexplained cumpnncnr \\c iirtclnpt 11) dlrtirlgui5h \\;igc and juh J~xrirninarion.The di\tincrion I\ rclc\;inr \\ here uccup,~ticjri14 i~\cll'orico f ~ h \;~ri;iblciJcrcrmin~ngc;irnlng\. c \V,igc. dlscr~rn~n;~rionoccitr\ 11'. C\CII \\ithlri c~ccup;~rions.group ll~tkrcncc\~n riicari pcr\on;~l c.ti.~r.ictcr~\tic\c-.~nncjrcnt~rclyc\pIa111group d~lkrcricc\In Iiic.an c;irrii~ig\.Joh O~\cri!li~n.~;ic~nocciir\ if. for ~ic~ri-ccc)noni~crc;i\on\. the ~ l l l l r c n\c\c\ or r;rc.c\ ti,i\c uricq,~al.iccc\\ to ~ I i higher-p.i!ing oc.cupa[lon\. t c Our proccclurc I'or Iiie.i\Lrrlrlg di\crini~n.it~ijnl;jllo\r\ rh;~rcon\cn:~on;ill! u\c-d In ~ n d u \ r r t a l ~ /c.ounrrtc\ ~ t l -' The \~anJ.irll tcchn~quchjr rnc.;i\urlng cl~\cr~rninattorihc-nI\\() groirp\ tl~ll'crIn thcir pr.r..oniil cIi;ir;~crcri\r~c\.irid !n \\ 1hc furlc.r~clnrcl;ir~ng~ h c \ cc . t i ; ~ r . ~ ~ c r ~tot ~c.lrrilrig\ \ c i I\ to c.oliip;irc lh'a~r c ~ c [ ~ii~c.iri\s,igc, ~ . ~ l \\ 1111 [Ilc~r'iic;~n\s.igc\ 11' :ill \sere p.iltl ,ic.cor~i!rig10 the \am< 'carn~ngs\~ritcturc'. th.11 I\. the \,i~iic con\t.inr tcrrn ;inJ \cr <sf cocllic.tcnts on (he ~nilcpcridcnt\;~ri;~hlc\ = ,l\\urnc 111.11 thc rll\.,ln \\.igc ol'mc~nI\ ir, ;~ricirti,it tif\\c~nicnGI (\\c could ccj~r;ill! u\c \\ .ind ir ,,. clcnot~ng.:\l'r~i.in\ ;inel n\in-:\l'r~c;in\ re\pccr~\cl! I '.f .\\\u:iic - rlic rnc;ln \\.~gc\ p tmcn I\ Jcrcrrii~ncclh! the c.lrnlng\ t'uncrion * - w - ir :- I.,,,( I im ( I ) here x, I\ :I\cctor t~I'cti.~r.ic~cr~\t:c~\k ~ p p l i i . ~IOh lriicri .ind i,clcno~e\thClr ~ ~i~c;iri\.iltlc\; ~ h c r cI\ .Ic.orrc\ponil~ngc\pic\\lon Ii)r \\otiicn Tt!c nic,in \r.igc \\htih \\oliicn \\auld rcccI\c 11'1hc)\\ere p.id .~ic\~rctirlg the 111.1lc\\.~geI, I,) ilJ rlic gro\\ d~lfcrcncc111 Iilc.in \\;~gc\I(;, hcr\\ccn riicri .ind ~.\o~iicric;!ri he  divided inlo the part 'cxplaincd' hy different personal charactcristics (W,- f,(il)). and the uncxpluincd part (fn,(if)-60. reflecting dilicrcnccs in thc con\t;lnt terms and coefficients of the regression equztions I'or men and werncn: Ci = \5 rn- G:, = (rim-f',,(if)) +(fm(<,L -it,)= E + D rc$pc.ctivcly (2) shere E i4the explained and D the unc\plaincd part of the gross dilfcrcncc. The cstirn;~tionof the \6;1gcreceived by men if they ;Ire paid according to the i~111;1lcuagc structure pcrrnits a corresponding dccomposition. Th;~tp;irt ol' G i\hich IS due to 1;tbor niarkct discrimination is in turn dccnmpos~blcinto the 1);lrts uttribut;tblc to uagc and job discrimina(ic~n.' Tlic cho~ccof occi~p;ttion can iri:lucnce the u;~gca uorkcr receives: oc.cup;ction may bc oric of the personal characteristics includcd among the indcpcnilcnt \ariablcs in thc c;lrnlngs I'unction. The tinding of significant coctlicicnts on dummy \arlable.; rcprcscnting occupation uould not alfcct the analjsis if the dctcrniin.~ntiof occup;~tional:~ttainmcntucrc thc same for nicn and uorncn. tlouc\cr. lob d~hcriniiuarionmay cause men and somen uho otlicrui\c have the \,inic c~h;~r;~ctcri.;ticsto work in diticrcnt occupations. Thuh Iijr riicn the s;~niplcproportion in occupation i is gi\cn by plm= gm(Tm). ( 3 ) Tl~cprohahrlity of U O I I ~ ~ I I ;~tt;~iningoccup;~ti~ri if their occupational i ;Itt;1IrirTicnt 163s dctcrnilnccl in the sarnc \ \ ; ~ y;IS (hilt ol'mcn would bc g,(<,). Tlic gros\ cli l1.crcnc.cI ri rnca ri u ;~gcscan he ~icc~rnposcdas follou s: - XI',,,,(i ,,,,~ ( p ,--g,(i,)) ,