Evidence on omitted variable bias in earnings equations (original) (raw)
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Journal of African American Studies, 2008
By combining difference estimators that capture racial and regional variation with intergenerational linkages in the Panel Study of Income Dynamics, we calculate the effects of Brown v. Board of Education on earnings across two generations of men. The longer a black man was exposed to post-Brown primary and secondary schools, the higher his earnings. Brown especially affected black men living in states that showed greater openness to later desegregation efforts. We speculate that these positive earnings effects reflect a hope for future change, both in schools and the workplace, which provided greater incentive to acquire human capital. We find weak evidence that Brown also increased earnings for a second generation of black men. This may indicate relaxed credit constraints due to larger earnings for the first generation. Although workplace-reform legislation such as the Civil Rights Act of 1964 certainly affected black earnings, particularly in the South, the evidence presented here suggests that Brown itself mattered as well.
Long-Term Earnings Differentials between African American and White Men by Educational Level
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Journal of Human Capital, 2015
We examine gaps between minorities and whites in educational and labor market outcomes, controlling for many covariates including maternal race. Identification comes from different reported races within the family. Estimates show two distinct patterns. First, there are no significant differences in outcomes between black and white males with white mothers. Second, large differences persist between these groups and black males with black mothers. The patterns are insensitive to alternative measures of own race and school fixed effects. Our results suggest that discrimination is not occurring based on the child skin color but through mother-child channels, such as dialect or parenting practices.
2014
Chay, Guryan and Mazumder (2009) found substantial racial convergence in AFQT and NAEP scores across cohorts born in the 1960's and early 1970's that was concentrated among blacks in the South. We demonstrated a close tracking between variation in the test score convergence across states and racial convergence in measures of health and hospital access in the years immediately after birth. This study analyzes whether the across-cohort patterns in the black-white education and earnings gaps match those in early life health and test scores already established. It also addresses caveats in the earlier study, such as unobserved selection into taking the AFQT and potential discrepancies between state-ofbirth and state-of-test taking. With Census data, we find: i) a significant narrowing across the same cohorts in education gaps driven primarily by a relative increase in the probability of blacks going to college; and ii) a similar convergence in relative earnings that is insensitive to adjustments for employment selection, as well as time and age effects that vary by race and state-of-residence. The variation in racial convergence across birth states matches the patterns in the earlier study. The magnitude of the earnings gains is greater than can be explained by only the black gains in education and test scores for reasonable estimates of the returns to human capital. This suggests that other pre-market, productivity factors also improved across successive cohorts of blacks born in the South between the early 1960's and early 1970's. Finally, our cohort-based hypothesis provides a cohesive explanation for the aggregate patterns in several, previously disconnected literatures.
Understanding the Sources of Ethnic and Racial Wage Gaps and Their Implications for Policy
Handbook of Employment Discrimination Research, 2005
Previous studies show that controlling for ability measured in the teenage years eliminates young adult wage gaps for all groups except black males, for whom the gap is reduced by approximately three-fourths. This suggests that disparity in skills, rather than the differential treatment of such skills in the market, produces racial and ethnic wage differentials. However, minority children and their parents may have pessimistic expectations about receiving fair rewards for their skills in the labor market and so they may invest less in skill formation. Poor schools may also depress cognitive achievement, even in the absence of any discrimination.
Demography, 2019
Despite efforts to improve the labor market situation of African Americans, the racial earnings gap has endured in the United States. Most prior studies on racial inequality have considered its cross-sectional or period patterns. This study adopts a demographic perspective to examine the evolution of earnings trajectories among white and black men across cohorts in the United States. Using more than 40 years of longitudinal earningsrecordsfromtheU.S.SocialSecurityAdministrationmatchedtotheSurveyof Income and Program Participation, our analyses reveal that the cohort trends in the racial earnings gap follow quite different patterns by education. Race continues to be a salient dimension of economic inequality over the life course and across cohorts, particularly at the top and the bottom of the educational distribution. Although the narrowing of the racial gap among high school graduates is in itself a positive development, it unfortunately derives primarily from the deteriorating economic position for whites without a college degree rather than an improvement in economic standing of their black counterparts.
Early Life Environment and Racial Inequality in Education and Earnings in the United States
SSRN Electronic Journal, 2000
We thank numerous seminar participants and Blaise Melly for helpful comments. The views expressed here do not reflect the views of the Federal Reserve system. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
2005
Summary. Regression, matching, control function and instrumental variables methods for recovering the effect of education on individual earnings are reviewed for single treatments and sequential multiple treatments with and without heterogeneous returns. The sensitivity of the estimates once applied to a common data set is then explored. We show the importance of correcting for detailed test score and family background differences and of allowing for (observable) heterogeneity in returns.
Black-White Achievement Gap and Family Wealth. National Poverty Center Working Paper Series# 07-02
This paper examines the extent to which family wealth affects the race-child achievement association for young children based on data from the Panel Study of Income Dynamics. We found little evidence that wealth mediates the black-white test scores gap. However, liquid assets, particularly holding in stocks and mutual funds, are positively associated with schoolaged children's test scores. We speculate that this may partly reflect unmeasured personality traits of the parents such as a stronger future orientation or the financial savvy. We also found that the association was mediated through both material deprivation and family processes pathways. We made an attempt to strengthen the causal inference between wealth and children's test scores with the instrumental variable approach, the results were nevertheless inconclusive. 2 WEALTH AND THE TEST SCORE GAP Research based on test results from the National Assessment of Educational Progress (NAEP) conducted since the 1970s showed a substantial lag in the achievement of black students vis-à-vis their white counterparts. These disparities have been observed to exist before children enter kindergarten, widen as they move through elementary and middle schools, and persist into adulthood (Phillips, Crouse and Ralph, 1998). Analyses by Hedges and Nowell (1998) show that the gap has narrowed in the past three decades but the rate of decrease has slowed down since 1988. Results from the early 1990s, however, indicate that the gap had widened again (National Center for Education Statistics, 1999). This early achievement gap between blacks and whites has very important individual and societal consequences. At the individual level, it is related to one's later life chances such as educational attainment, earnings (Jencks, 1998; Johnson and Neal, 1998), employment behavior, and health (Reynolds and Ross 1998). At the societal level, cognitive achievement gaps have implications for raising the next generation, for the skills of the workforce, for racial dynamics, and for international competitiveness. Understanding factors contributing to this gap, therefore, is of paramount importance. Much research has documented the association between children's cognitive achievement and parental SES as measured by education level, occupation, and income (see review in Bradley and Corwyn, 2002; Hoff, Laursen and Tardif, 2000). Many of these studies focus on the effect of poverty-defined by family income-on children's achievement (e.g. Huston, McLoyd, and Coll 1994; Duncan and Brooks-Gunn, 1997; Yeung, Linver and Brooks-Gunn, 2002). However, household wealth (i.e. net worth)-which displays a distribution that is more unequal than that for income-has received little attention in this body of literature.