Homework 7 Economics of Life, Gender, Race, Family Victoria Vernon
1. Suppose an employer offers a base wage of $20 per hour for the first 40 hours each week and overtime
pay of $30 per hour for any hours beyond 40. Suppose A chooses to work 36 hours and B chooses to
work 42 hours. Compute average weekly earnings of employees A and B. Compute earnings gap in
percentage terms between them. Does this gap constitute discrimination?
2. According to recent data, among workers aged 45-64, women made 73% as much as men. But in the 25-34
group, the number rises to 88%.
a. How would you explain larger gender gap among older workers?
b. Why has the gender earnings gap narrowed since the 1980s?
4. “Discrimination cannot be sustained in competitive markets.” Briefly assess this statement from a
theoretical point of view.
5. In the land of Chin there are two distinct and equally numerous peoples: Yins and Yans. The Yang have
historically been stronger and more aggressive that the Yins. Both the Yins and Yans play paddle tennis, but
paddle tennis tournaments have always been segregated by group because of the physical advantages of the
Yans. The Yin do not object to paddle tennis tournaments being segregated, but recently have been upset
about the fact that the top Yin players receive less than the top Yan players. You have been hired by the
Chin Paddle Tennis Association (CPTA) to access the market for paddle tennis players. CPTA have asked
you a few questions given below.
A. What is the most likely source of the wage differential between the Yin and Yan paddle tennis
players? Briefly explain.
B. Is this discrimination as economists define the term?
C. Is the wage differential likely to persist over time, or do conditions in Chin have to change in order
for the differential to disappear?
6. Women who own their own businesses earn net profits that are only half as large as the net profits earned
by men. Why are women more willing to accept lower profits? Could this reflect poorer options for
women as employees? Are lower profits by women evidence of discrimination? Could they evidence of
bad luck or different risk preferences among men and women?
7. Estimates suggest that about 28% of the gender wage gap can be explained by the fact that men and
women tend to take different jobs. Describe two reasons why this still does not rule out labor market
discrimination as a cause of the gender wage gap.
8. Provide an explanation other than pure discrimination that could account for the following group
differences. (You do not need to agree with your explanation; just try to make it plausible).
a. Married men without children earn more than single men
b. People with criminal records earn less than other people with identical education and intelligence.
c. Japanese-Americans earn more than other Americans.
d. Teachers earn less than equally-educated non-teachers.
9. Give one example of statistical discrimination in the labor, product, insurance or dating market.
10. Respond to one of the online articles in 1-2 paragraphs.