A standard object of empirical analysis in labor economics is a modified Mincer
wage function in which an individual’s log wage is specified to be a function of education,
experience, and an indicator variable identifying race. Researchers hope that estimates from
this exercise can be informative about the impact of minority status on labor market success.
Here we set out a theoretical justification for this regression in a context in which individuals
live and work in different locations. Our model leads to the traditional approach, but with
the important caveat that the regression should include location-specific fixed effects. Given
this insight, we reevaluate evidence about the black-white wage disparity in the United
States.