Consider a labor market for men and women with two types of workers in each group, high ability (H types), and low ability (L types). H types among men and women have a productivity of 70 and L types among men and women have a productivity of 30. Among women 2/3rds are H types, and 1/3rd are L types, and among men ½ are H types, and ½ L types. Suppose affirmative action for women reduces the cost of college for all women to 10. What happens to the average wage gaps between men and women? Recall that employers know the shares of H and L types, but cannot observe individual types. ● Women on average make around 12% more than men. ● Women on average will make 40% more than men. ● Men will make 40% more than women. ● Women on average make 2/3rds more than men.
Consider a labor market for men and women with two types of workers in each group, high ability (H types), and low ability (L types). H types among men and women have a productivity of 70 and L types among men and women have a productivity of 30. Among women 2/3rds are H types, and 1/3rd are L types, and among men ½ are H types, and ½ L types. Suppose affirmative action for women reduces the cost of college for all women to 10. What happens to the average wage gaps between men and women? Recall that employers know the shares of H and L types, but cannot observe individual types.
● Women on average make around 12% more than men. ● Women on average will make 40% more than men. ● Men will make 40% more than women. ● Women on average make 2/3rds more than men.
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