Suppose years of schooling, s, and experience, e, are the only variables that affects earnings. The equations for the weekly salaries of male and female workers are given by:

wm =500+100s+25e and

wf =300+75s+10e.

On average, men have 14 years of schooling and 20 year of experience, while women have 12 years of schooling and 16 year of experience.

a)What is the male-female wage differential in the labor market?

b)Using the Oaxaca decomposition, calculate how much of this wage differential is due to discrimination?

c)Can you think of an alternative Oaxaca decomposition that would lead to a different measure of discrimination? Which measure is better?