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Racial Labor Market Gaps: The Role of Abilities and Schooling Choices

Racial Labor Market Gaps: The Role of Abilities and Schooling Choices Abstract: This paper studies the relationship between abilities, schooling choices, and black-white differentials in labor market outcomes. The analysis is based on a model of endogenous schooling choices. Agents' schooling decisions are based on expected future earnings, family background, and unobserved abilities. Earnings are also determined by unobserved abilities. The analysis distinguishes unobserved abilities from observed test scores. The model is implemented using data from the NLSY79. The results indicate that, even after controlling for abilities, there exist significant racial labor market gaps. They also suggest that the standard practice of equating observed test scores may overcompensate for differentials in ability. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Human Resources University of Wisconsin Press

Racial Labor Market Gaps: The Role of Abilities and Schooling Choices

Journal of Human Resources , Volume 43 (4) – Apr 4, 2008

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Publisher
University of Wisconsin Press
Copyright
Copyright © University of Wisconsin Press
ISSN
1548-8004
Publisher site
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Abstract

Abstract: This paper studies the relationship between abilities, schooling choices, and black-white differentials in labor market outcomes. The analysis is based on a model of endogenous schooling choices. Agents' schooling decisions are based on expected future earnings, family background, and unobserved abilities. Earnings are also determined by unobserved abilities. The analysis distinguishes unobserved abilities from observed test scores. The model is implemented using data from the NLSY79. The results indicate that, even after controlling for abilities, there exist significant racial labor market gaps. They also suggest that the standard practice of equating observed test scores may overcompensate for differentials in ability.

Journal

Journal of Human ResourcesUniversity of Wisconsin Press

Published: Apr 4, 2008

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