Wage discrimination: a statistical test

Abstract

Measurements of wage discrimination, based on gender, age, race or religion, are important for empirical economists. Traditional approaches to the measurement of wage discrimination do not set up the question of discrimination as a hypothesis that can be statistically tested. Furthermore, they face the so called ‘index number problem’. In this paper, an alternative approach is presented where wage discrimination can be tested as a statistical hypothesis. Furthermore, the proposed method eliminates the index number problem.