World Bdnk Repr int Series: N u m b e r 262

1. B. Kn ight a n d R. t i . Sabot

Labor Market Discrimination in a Poor Urban Economy

Kc.pr~ntc.d w1tt1 pcmrrn1-1~tn frcvn~ /~~rrrrr~rl 01 l)i.ilr.li~/trrrc.trl .';!rtilrc,c, vol . 19, n o . 1 (October I O H 2 ) . pp t > ; - 37

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W o r l d Bank R e p r i n t s

So. 227. Jt,hanntss I:. Linn, "The Costs of U r b a n i z a t i o n in D e v e l o p i n g C o u n - tritws," Ei.t~trottric. I)t.r~c~lolittrc~~r/ r r t r l i C~tl lr trr~. ' Clrr~trgc

S o . 228. G u y 1'. I ' f t~fft*rm.inn, "Lat in Amer i ca a n d t h e Car ibbean: Economic Pt~rformancc- a n d Policic-s," S~rrrt/rrr~r~.lrrtr Rczpictc~ of Motrngc~trrcirl atrd Ect~trottric-5

No. 229. Av ishay Dravc~rman a n d Joseph E. St ig l i tz , "Sharec.ropping a n d t h e l n t c r l i n k i n g o f A g r a r i a n Markets," Attrc*ricntr Ecorrot~ric Rczlictc~

So. 230. A b d u n Noc;r, " M a n a g ~ n g Adu:t L i t e racy Training," Prosyccts

S o . 231. P:.la Balassa, " S h i f t i n g Patterns o f W o r l d T rade a n d Con.?etition,"

Pdo. 232. Johannc~s Risschop, W i l f r r d Candler , J o h n H. D u l o y , a n d Gera ld T. O'Mara, "ThP I n d u s Rasin M o d c l : A Special A p p l i c a t i o n o f T w o - L e v e l L i n c a r Programminq, " Ma//rrttral ical Pro,qrattrtrritrg Strrdy

No. 233. K e i t h Brad ley a n d A l a n Cirlb, " M o t i v a t i o n a n d C o n t r o l in t h e M o n d r a g o n E x p ~ r i r n ~ n t , " a n d "'The Rep l i ca t i on a n d Susta inab i l i t y o f t he M o n d r a g o n Expc~r iment," Britislr \orrrrral of Itrdtistrial Rclntiotrs

No. 231. Gary P. Ku tc t i i * r a n d Roger D. N o r t o n , "Operat ions Research M e t h o d s in A g r i c u l t u r a l Po l i cy Ani~lysis," Eurollcatr \,;~rrrrral of Oycmliotral Ki..ri~rrrclr

N o . 235. I h l a Dalassa, "Economic R c f o r m in China," Baircn Nnziotralc dc l Lazporo Qrtrrrt ivrly .Y~~l~ic,tc~

N:). 236. S. van Wi jnhcrgc-n, "St.igflationary EHvcts o f Monetary Stab i l i za t ion I ' t ~ l i c i c *~ : A Qu,lntitativc- Ana lys is o f S o u t l i Korca," /orrr:.aI of Dcrlclolj- ttIl.tl1 \:~.~ttlitttl;i.~

N o . 237. Gcrr.hon I:cdcr, K i c h ~ r d Just, a n d K r ~ u d Ross, " l ' rojccting D e b t Se rv i c ing Capac i ty o f I>cv t - lop ing Countr~es, ." \orrrtral of Fittntrcial atrd C)lrrrtrl it111 IIV A trrrly>i.;

No. 2.18. I< ichard 11. C;olilm,l~\ a n d 1.~11 Squire, "'Ti~c:inical CI!angt., Labor Use, ,)nil In..orncm I ) i s t r i b u t ~ o n in t t ic hiutl,~ I r r i g i ~ t i o n Projcct." C~.ottottric I ~ r . r l ~ ~ i c l l ~ r ~ r c . t r I r r t r i i Crt l! rrrrrl Clrtrtrgi*

S o 2 j . h l i c h . ~ c ~ l I : ingi~, "'Tr,iilc , ~ n t l t h e S t ruc tu re o f A m e r ~ c a n Industry," /\trtrrr/\ 111 ~ l r i . I l t t ~ i ~ r t c ~ r ~ t r Ai.r~tlt.ttry of I'i)lrtic~rrl atrd Social Scic-trc-1.

No 2.10 ' I), lvi i l M C; fJrwbi*ry , lnd J o s r p h I.. Sl ig l i t z , "Optimal C o m m o d i t y Stoc h - p ~ l i r ~ g I<u l c b 5 , " O i \lnrri l '~ .o t~ : * t t r~~. lp~iltl=r,s

No 2.1 1 l \c* l ,~ I\,I~,I\\,I, " l ~ i ~ ~ ~ i ~ t ~ i l i l ~ r i t ~ n i AILII? 515 in I J t ~ v v I o ~ ~ i n g l ~ c t ) ~ i o t ~ ~ i c ~ s : A n O ~ e * r v ~ c ~ w , " IVrrrltl l)r~r~c~litlttttc~trt

St) 1.12 '1' N Sr in i v ,~ \ .~ r i , "<;c~.~l!r.ll I ' q u i l i b r i u m 'Thcbory, I'rojcct i fv, i luation, . ~ n t l I :cx)~iomic I)c.vc.l.~prnc*n~," 'lki. T/tc.ilr,v ntrd C.~pcric-rrc-c* of E~-otrc~?tric- I ~ r ~ l ~ l ~ l l ~ / l t t l l ~ t l l

So 2.43 I :mm,~r i i r t~ l Jirnclnt-/, "'I'Ii(. V,iluc~ ol' Squat ter I>wc l I i ngs in Dcwelop ing- <'ountric~s," I 4 otr~:ttttc I ) c ~ ~ ~ r ~ I i ~ ~ ~ t i r l ~ t ~ ~ t r t r r l c'rtltrrral Chnn,qca

SIB 24.4, lL)r14 I ' le.~hovic , ~ n d M a r j . ~ n 1)olc-nc, "Hc~gion.i l I >cv i * l (~pn icn t i n a Soi . i ,~ l i \ l . I ) c *v i * I i ~ l t i ng , .III~ h l i ~ I t i r i , ~ t i o n . ~ l C o u n t r y : The. C'.isc- o f Yuffo- \I.IVI.I," 1tr!1*1 t r ~ r ~ t t ~ r r t r l R~.~qrtlrraI .Si.rl,tr[.l. R~* r * t l *~ l -

Labor Market Discrimination in a Poor Uiban Economy

hj . J. H. k":i,qltf* cirtel R. I / . Subor**

Luho r rrt trrkrl tli.\c-rrrrrirrtr~ic,rr hj. .stl.u t r r~ i l h~ r e l i c 1 irr u poor rtrhur~ cpcorrc~r,!,. is t;rrul~~:c~tl rc.\irr,q u .$lrrrclj. of rr~trrrr~/crc~/uriry c,nrp/oj.c.cls irr 7irrr:unic;. Tlrrrc* tirep lurge~ ciiffc~rc~rrcc~s irr rrrc9crrl 11 trgcps h?. hot11 sc.u urrd rut.',. C'.\ing ~c~c.lrrriqcrc,.v p rc~~~ io r r . v l j ~ trpplic,t/ to c i r~~c~ lope~ t l c~orrrr/ric~.u, i t is /i;urrtl /Irc;l. \I l rrrc~us //I(* \c3.r tli// i,rc-rc.r irr rrrcSerrr 11 tr.qcbs c.clrr he c~.upluirrc~d r r r i r r ~ r l ~ ~ irr /t,rrvr.v o/.cc~.v tli/ic~rrrrc.t,.\ r t r pc,r.vorrc;l c /rtrrc~c~/t~ri.c/ic.s. //re1 ~ . c ~ r c ' t l r f ~ i~ rc~ r r c i~ is rrrtrirrl!~ /Irc~ rc~.\ctl/ q/ wtr,qcl crrrtl /oh tli.vtritrrirru/ron. .4n trr/t.r~rl)/ i.r rrrtrtk, t o tJ\-pltrirr 11rc. rc~srel/.v. II h i t 11 rrtrr i-rbror/c8r /(I c,orrrr,rorr p rc~. \~r~~ l~u. \ r / ro r rs tr l~ort/ c l i . \ e r i~tr irrtr~iotr.

I. I?. 1RC ) l ) L ' C ' 1 If )%

D i s r ~ r i g u ~ \ h ~ n g k t ~ c c r i d~lrcrc:nccs i n earnings u h ~ e h i;rn bc ju5tificd o n cffic~cnc.!. g r ~ ) u n t i s and how ~ h l c h . t y rnih;rlloc;~ting I i ~ h o r . ;rrc incl l iCicnt is rclc\:rnr t o the clch;rtc. t io l l y ctrntcstcd In ni;rriy c l c v c l ~ ~ p i n g countries. over NH~C, , p ~ b l ~ i ! . ~ I c c o r d i ~ i g to t h ~ \ d ih t~nct ion . govcrnriicn: in tc r \cn t ions t o :tIrcr the clrrntnph \rructurc o n q u i t ) ::.rounds ni;r!. c i thcr Ir:ipro\c or \rcrr\cn ~ l l o c ; r t ~ \ c cliic.icnc.!. I)! I ; ~ h o r rn;lrkct dl\crirnin;rtion rt i \ gcncr;~l ly rnc'.Int that u r lnc \rork.crs ;ire ~, I IJ Inorc th;in orhcr\ t r i rh the \.lnic cndo\r.rncni ol' prod!~c. t~\c ccor:olnlc c t i ;~ r . l c~cr i \ t i c i hy \ i r t uc I)!' \omc nari-ccononiic pcr- son;\l c h ; ~ r ; ~ c t i ~ r ~ . ~ t ~ c . The ctl\tcnc.c ol' t l l \ c r i r l i i t i . ~ ~ ~ o n 1nipllc.5 [hi l t pcncrrl- mcrll\ t i . ~ \ c ; I r l ~ :pp t~ r t~ r l i l l ! . \ in iu l t ;~r icou\ ly 10 I n i l v o \ c the c l~ \ t r i hu t l on of'

In!ustl~,c c r l Ji\cr1ni1ri;111or1 ti.r\ \purrcci rile c ro \ r th ot c.l \r l :~ghts niovcnicnts and 01' rc.nrctll;~l go\crnr l icnt Icp~\l:rt ion ~n tlic ~ridu*trr;~l l /c.J \oir;ll d c l ~ i o c - racic\ l ) ~ \ c ~ r ~ t ~ i ~ r i . ~ \ ~ o n I\ t t i ~ ~ \ ,111 lrTi~)orl;1rit l ~ o l ~ t r c ~ . ~ l I\\LIC lrrc\pcct1\c of' tkc c ~ \ t \ 11 t ~ i i p o * ~ . \ o r I I T ~ ~ I I L . , I I I ~ ~ I ~ \ f.or ttic , I ~ \ I I I ~ ~ I I I ( ~ I ~ ~ ~ ~ I I ~ L ~ o I I ~ ~ Dc\p i tc ttic ~ O ~ I L } r ~ * l c \ . ~ ~ i c ~ c 01 IIIC p t i C r ~ t i r ~ i c r ~ o t i 111 pu1r ~xlL~r* . t r lc \ . ~ i ~ \ ~ ~ r ~ n ~ ~ r i . ~ t i ( > r i 1i;ih

tKcn rliorc I I~ I~ I I \ I~L~ I ! \I~ILIIC<I 111 r ~ ~ t i c ~ l t ~ r ~ l r ~ c ~ , l . ~ r p ~ - l > ~ L . , I L I \ C t>f ' t l ic 1.1ck ol' appropr I;IIC ~I;II,I -

I n [ t i ! \ p.tpcr ~c .~i)pl! IO ~ l c t . ~ ~ l c ~ t1.1l.1 1';t~r:i I;III/.II)I,I \~ t i . i t I n [tic r ~ c h Countr~c\ ! i . ~ \ c L,otrlc 11) he \t ic ~ ~ ~ I ~ \ ~ I ~ I I O I ~ , I I l oo l \ d . ) l ' .iri.11!\1\ 01 d l \ c r ~ n i ~ n ; ~ - lion r t i c (1.11.1 \e l \re LI\C. \\.I\ g ~ * n c r . ~ k d h! .I 1'171 c ~ t ; ~ b I ~ ~ t i r r i c ~ i t - h ; ~ \ c c l \Llr\c!. - or \ l l r ~ i c 1.000 r.~ric!oi~i!! ~ ~ * l c ~ ~ t c d r t ~ r I , ~ - r \ 1 1 1 I ,III/.I~I,I.\ ~ i i ; ~ ~ i ~ ~ V ; ~ e t ~ ~ r i r i g Wctor. \~CCI;III!. dc \~g t i cd h! one t > f t t ;ILII t ior \ I,, ,I\ L ) I L ~ thc ( ~ c ~ i c i c ~ i c ~ c ~ i r i t tic U ~ ~ . I I I * ~ h o r Vorcc ~.II,I 111 pt lor ~ o ~ ~ l i ~ r l c \ kr t i ~ c t i p r c t ~ l t ~ d ~ t l c t ; ~ ~ l ~ * ( i , ~ r i ; ~ l ! \ i \ o f

~ ~ ~ C I I ~ ~ I I : C * I I U~,x..tr~h I ) L ~ . I I I ~ + . C ~ : I I !ic \Va,r lal l i . ~ t ! h . \\,I.),II;!I,~~~ 1 ) t

68 THE J O U R S A L OF UEI'ELOPS!EST S T L ' D I ~ .

%age \tructurcs and o f u hat rhey r e w a l about rhc determinants o f wages and the funct ioning o f I ;~hor markets. '

O u r concern is t r l th d ibcr iminat ion by brn and by racc. O u r results arc \urpr is~n\r . They r u n counter t o t\r.o Lommon presumptions about d iscr imi- nation. One is t h a ~ de\c lopmcnt can hc c\pccrcd t o h r i ngchangc i i n atr i tudcl i and in\titurior,s u hich d imin ish arbi t rary disad\.antages int l ictcd o n \somen hy sex Jiscrini ination i n ;;.. labor marhct: such d i s c r i m i n ~ t i o n is found t o bc f;ir \m;~l lcr I n T ; ~ n / a n ~ a r han i n r he Uni rcd States. The or her prcsumprion i \ that racial Jiscrimin;irion 1s practised c ~ t h c r b y a ma jo r i l y group w i th p o u c r g gain st a m ino r i t y I ; i rk~np \uch putrcr o r i n somc instances such as South ,.lfrica b y a m ino r i t y againsr ;i rclati \ .cly poir-erlrss major i ty : u c tind evidence t'or T ;~n/~ ln i ; l o f discrirninarion i n f a \ o r o f the non -A f r i can m ino r i t y g roup ui th apparently l ~ m i t c d po\vcr.

Scr.r;on I1 outlines the merhg~ds \be employ r o a n a l y ~ c lahor markc1 d i \ c r l~n ina t i on i n Tanlania. Section III aiwsscs the cntcnt o f sen discrimina- t i on arid Scction I V rhc cxrcnt o f racc discrimination. I n Section V \re d r a u out borne o f rhe i rnpl ic ;~l ion\ o f i j u r t inc l ing.

O u r a i m I.. to dccornpox (he Ji l fcrcncc I n nican \\ages hcrirccn rn;ilci and li.rn;\lcs o r hcruccn Afr icans and non-Afric; ins i n t o the component 'cxpl; i~ncJ' h y diITer~.nccs i n econornic charactcrisrics beluc.cn [he r t ro groups ; ~ n d the 'uncxplainccl' coniponcl l t \ \ h ~ c h can hc regarded as rcflccring rhc cxtcnt of labor marker di\crirnin;irion. N'ltti in rhc unexplained cumpnncnr \\c i i r tc lnpt 11) dlrtirlgui5h \\;igc and juh J ~ x r i r n i n a r i o n . The di \ t incr ion I\ rclc\;inr \\ here uccup,~ticjri 14 i~ \c l l 'o r ic o f ~ h c \ ;~r i ; ib lc i Jc rc rm in~ng c;irnlng\. \V,igc. d l sc r~ rn~n ;~ r ion occitr\ 11'. C\CII \\ithlri c~ccup;~rions. group l l ~ t k r c n c c \ ~n riicari pcr\on;~l c.ti.~r.ictcr~\tic\ c-.~nncjr c n t ~ r c l y c\pIa111 group d ~ l k r c r i c c \ I n Iiic.an c;irr i i~ig\. Joh O~ \c r i ! l i ~n .~ ; i c~n occiir\ i f . for ~ ic~r i -ccc)non i~c rc;i\on\. the ~ l l l l r c n t \c\c\ o r r;rc.c\ ti,i\c uricq,~al .iccc\\ to ~ I i c higher-p.i!ing oc.cupa[lon\.

O u r proccclurc I'or Iiie.i\Lrrlrlg d i \ c r i n i~n . i t~ i j n l;jllo\r\ rh;~r con\cn:~on;ill! u\c-d In ~ n d u \ r r t a l ~ / ~ t l c.ounrrtc\ -' The \~anJ. i r l l t cchn~quc h j r rnc.;i\urlng c l~ \c r~rn inat tor i \\ hc-n I\\() groirp\ t l~ l l 'cr In thcir pr.r..oniil cI i ; ir ;~crcri\r~c\ .irid !n 1 hc furlc.r~cln rcl; ir~ng ~ h c \ c c . t i ; ~ r . ~ ~ c r ~ \ t ~ c i to c.lrrilrig\ I\ to c.oliip;irc lh'a~r c ~ c [ ~ ~ . ~ l i i~c. i r i \s,igc, \\ 1111 [ I l c ~ r ' i ic;~n \s.igc\ 11' :ill \sere p.iltl ,ic.cor~i!rig 10 the \am< 'carn~ngs \~r i tc turc ' . th.11 I\. the \,i~iic con\t.inr tcrrn ;inJ \cr <sf cocllic.tcnts o n (he ~ni lcpcr idcnt \ ;~ r i ;~h lc \

, l \ \urnc 111.11 thc rll\.,ln \\.igc o l 'mc~n I\ ir, ; ~ r i c i r t i , i t t i f \ \ c ~ n i c n G I ( \ \ c could = ccj~r;ill! u\c \\ .ind ir ,,. c lcnot~ng .:\l'r~i.in\ ;inel n\in-:\l 'r~c;in\ re \pccr~\ cl! I '.f .\\\u:iic rlic rnc;ln \\ .~gc \ p t mcn I\ Jcrcrri i~nccl h! the c.lrnlng\ t'uncrion - - -

w ir :- I.,,,( im I ( I ) * - here x, I\ :I \cctor t~ I ' c t i . ~ r . i c~c r~ \ t : c~ \ k ~ p p l i i . ~ h l ~ IO riicri .ind i, clcno~e\ thClr ~ i ~ c ; i r i \.iltlc\; ~ h c r c I\ .I c.orrc\poni l~ng c \p i c \ \ l on I i ) r \ \ot i icn Tt!c nic,in \r.igc \ \ h t i h \ \o l i icn \\auld rcccI\c 11'1hc) \\ere p . id .~ i c \~ rc t i r l g I,) the 111.1lc \\.~ge I,

il J r l i c gro \ \ d~ l fc rcncc 111 Iilc.in \ \ ;~gc\ I(;, hcr\\ccn riicri .ind ~ . \o~ i i c r i c;!ri he

divided inlo the part 'cxplaincd' hy different personal charactcristics (W, - f,(il)). and the uncxpluincd part ( fn,( i f ) - 60. reflecting dilicrcnccs in thc con\t;lnt terms and coefficients of the regression equztions I'or men and werncn:

Ci = \5 rn - G:, = (r im -f',,(if)) +(fm(<,L -it,) = E + D rc$pc.ctivcly ( 2 )

shere E i4 the explained and D the unc\plaincd part of the gross dilfcrcncc. The cstirn;~tion o f the \6;1gc received by men if they ;Ire paid according to the i~111;1lc uagc structure pcrrnits a corresponding dccomposition.

Th;~ t p;irt ol' G i\hich IS due to 1;tbor niarkct discrimination is in turn dccnmpos~blc into the 1);lrts uttribut;tblc to uagc and job discrimina(ic~n.' Tlic cho~cc of occi~p;ttion can iri:lucnce the u ; ~ g c a 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.~nti of occup;~tional :~ttainmcnt ucrc thc same for nicn and uorncn. t louc\cr . lob d~hcriniiuarion may cause men and somen uho otlicrui\c have the \,inic c~h;~r;~ctcri.;tics to work in diticrcnt occupations. Thuh I i j r riicn the s;~niplc proportion in occupation i is gi\cn by

plm = gm(Tm). ( 3 )

T l ~ c prohahrlity of U O I I ~ ~ I I ;~t t ;~ining occup;~t i~ri i if their occupational ;Itt;1IrirTicnt 163s dctcrnilnccl in the sarnc \ \ ; ~ y ;IS (hilt ol'mcn would bc g,(<,).

Tlic gros\ c l i l1.crcnc.c I ri rnca ri u ;~gcs can he ~ icc~rnposcd as follou s:

- XI',,,, ( i ,,,, ~ ( p , , - -g , ( i , ) )