Working Paper: NBER ID: w12257
Authors: Kevin Lang; Michael Manove
Abstract: We propose a model that combines statistical discrimination and educational sorting that explains why blacks get more education than do whites of similar cognitive ability. Our model explains the difference between blacks and whites in the relations between education and AFQT and between wages and education. It cannot easily explain why, conditional only on AFQT, blacks earn no more than do whites. It does, however, suggest, that when comparing the earnings of blacks and whites, one should control for both AFQT and education in which case a substantial black-white wage differential reemerges. We explore and reject the hypothesis that differences in school quality between blacks and whites explain the wage and education differentials. Our findings support the view that some of the black-white wage differential reflects the operation of the labor market.
Keywords: education; labor market; discrimination
JEL Codes: J7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AFQT (Armed Forces Qualification Test) scores (J45) | Education (I29) |
| Education (I29) | Black-White Wage Differential (J31) |
| AFQT (Armed Forces Qualification Test) scores (J45) | Black-White Wage Differential (J31) |
| Education and AFQT (Armed Forces Qualification Test) scores (I24) | Black-White Wage Differential (J31) |
| Education (at intermediate levels of ability) (I21) | Education Differential between Blacks and Whites (I24) |