A Major Challenge That Is Involved in the Empirical Investigation

question 21

Multiple Choice

A major challenge that is involved in the empirical investigation of wage discrimination is:

• A) The Oaxaca decomposition is subject to ability bias.
• B) The unexplained wage differentials are larger than the explained differentials.
• C) The absence of a comparison group leads to a systematic bias in the estimation of discrimination.
• D) Some of the control variables are not really pre-market characteristics, as their values might reflect discrimination rather than cause it.
• E) The unexplained wage differentials are too small to estimate.

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Definitions:

Complementary Goods

Products or services that are consumed together because the use of one enhances the use of the other.

Cross-Price Elasticity

A measure of the responsiveness of the demand for one product in relation to a change in the price of another product.

Substitutes

Products or services that can be used in place of each other, fulfilling the same need or purpose.

Cross-Price Elasticity

A measure indicating how the demand for one good responds to a change in the price of another good, showing whether they are substitutes or complements.