Abstract
In this article, the component of the gross wage differential that can be explained by productivity‐enhancing attributes and that which is due to unexplained factors and labour market discrimination are empirically determined. Individual data from the 1991 Living Standards Measurements Survey of Peru are used to analyse labour market earnings and to decompose the gross earnings differential. A large portion of the indigenous/non‐indigenous wage gap is unexplained by human capital and other observable differences.
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