20 women as potential experience is used rather than actual experience. In any case, the net effect of these three variables still suggests a reversal of the pay gap (pay advantage for women). When the constant term is taken into consideration, the effect from the difference in rewards is inflated in the opposite direction to the point that rewards account for 78 percent of the male pay advantage.

These results may be subject to two different interpretations. First, ignoring the effect of differences between the constants terms, one can argue that in many Latin American countries only a small fraction (if any) of the gross pay differential can be attributed to an inferior wage structure (differences in rewards) of women relative to men.<sup>43</sup> This remark should, however, be qualified because formal sector employees may be heavily represented in our samples -- and the role of public sector pay may be particularly distortionary. The overrepresentation of public sector employees in our data bases and the high wages paid to women workers in the government sector make us skeptical about the "no-or-little discrimination" results suggested by the present decomposition analysis. In addition, as argued below, it might be true that the constant term cannot be considered separately from the other "rewards" in the decomposition analysis but there is no practical objection that its place is among the "rewards" part of the gender wage gap.

The second interpretation stems from the last observation, that is, that the part of the wage gap attributed to the difference in the constant terms falls well within the potential discrimination aspect of the results. The constant term represents the "reward to the sex of the worker" when all other characteristics are equal to zero. In other words, the constant term can be interpreted as the earnings of an uneducated worker who is just about to enter the labor market. However, we are not prepared to accept that the difference in constant terms represents actual discrimination because information is lacking: the value of constant term is affected by factors pertaining to both labor demand and labor supply.' With respect to labor demand, one can mention differences in productivity between the sexes or imperfect information, while on the labor supply side there may be differences in tastes between women and men. This is a pessimistic conclusion to the present analysis. The light that was shed into the economists' "black box" (differences in rewards or "upper bound of discrimination") revealed that there was another black box inside it: the constant term is another black box on its own.

43This is not an uncommon finding in the literature on discrimination for developing countries. Knight and Sabot (1982) report that in Tanzania in 1971 only 5-17 percent of the gross pay differential between women and men can be att^ibuted to different wage structures when evaluated at male means while it is negative (-3 to _-45_ percent) if evaluated at female means. Simila **r** esults are reported in many of the studies included in Birdsall and Sabot (forthcoming).

4The role of the constan **t** erm in measuring discrimination is questionable, if the constan **t** erm is taken to proxy the average effect on earnings of productivity characteristics omitted from the analysis. However, if the earnings functions are correctly specified, then the constan **t** erm should be included in tne decomposition formula.