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Higher residual wage dispersion for white workers in post apartheid South Africa, 1995-2006: composition effects or higher skill prices?
- The Journal of Developing Areas
- Tennessee State University College of Business
- Volume 44, Number 1, Fall 2010
- pp. 71-100
- 10.1353/jda.0.0073
- Article
- Additional Information
Apartheid in South Africa ensured whites received more and better-quality schooling relative to Africans, coloreds, and Asians. It is hence conceivable, consistent with human-capital theory whites would receive relatively higher prices to their measured human-capital skills and would have higher dispersion of their unmeasured human-capital skills. We test this hypothesis. Specifically, we employ a semiparametric procedure to decompose 1995-2006 racial wage differences into regression coefficients, covariates and residuals and extend the literature by decomposing residuals into unmeasured skills and skill prices. Our findings support the theory: whites receive relatively higher prices to measured skills and have relatively higher dispersion of unmeasured skills, with the latter attributed to higher prices of unmeasured skills. We suggest better-quality schooling yielded higher returns to measured human-capital attributes for whites, and higher skills enabled whites to benefit more from on-the-job-training resulting in higher dispersion of their unmeasured human-capital attributes.