context of labor discrimination. 1 Studying the relationship between formal education and wages is

a well-established field, rooted in human capital theory (Schulz 1961; Becker 1964; Mincer 1974).

In general, the returns to schooling are higher for primary education, but still large for secondary

and tertiary levels. These findings have led others to explore the role of education on other social

outcomes, such as employment (Bloch and Smith 1977; Mincer 1989), the demand for schooling

(Jensen 2010).

However, few studies have explored the returns to education on finding formal

employment. Some studies have looked at the returns to discriminated groups, such as women or

non-dominant ethnic groups (Fryer et al. 2013, Ñopo 2012; Cunningham and Jacobsen 2008; Neal

and Johnson 2006). These empirical studies evoke unexplained variation in wages after

incorporating numerous individual and socio-economic controls. They find significant earning

gaps between discriminated and non-discriminated groups. 2

However, as much as these studies reflect social realities, given that discrimination is not

directly observed, certain authors argue that these approaches do not accurately illustrate its effects

(Charles and Guryan 2011; Fryer 2010). Overcoming these limitations is notoriously difficult with


Some notable exceptions are Dabos and Psachoropolous (1991), looking at the returns to

education on wages for self-employed workers, and Canavire-Bacarreza (2008) with a

preliminary exploration of ethnic wage gaps across the formal and informal sectors.


For example, Ñopo (2012) finds that the earnings gap in Latin America between ethnic

minorities (jointly indigenous and Africans) relative to non-minorities ranges from 27 percent to

57 percent of a minority worker's wage. The lower bound of this range is still larger than the 16

percent gender earnings gap estimated for the same region.


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