ABSTRACT
This chapter develops a wage model that would allow people to empirically assess whether or not there is a systematic relationship between a conventional estimate of wage discrimination and changing attributes of local labor markets. The hypothesis test presented in the chapter indicates that wage structures of workers vary significantly across SMSA's. The results of these tests confirm the appropriateness of the local labor market, as espoused by Hirsch and Hanushek, versus an aggregate US labor market employed in many other empirical studies. Within the context of a local labor market, the chapter explores sources of the black/white and male/female earnings differential for both 1970 and 1980. It also discusses the possible link between changes in certain measurable local labor market conditions and changes in the estimates of earnings discrimination. An aggregate wage model was presented which attempted to test the direction of the hypothetical links between changes in local labor market characteristics and the estimates of wage discrimination.
