Working Paper: NBER ID: w27689
Authors: Anna Aizer; Ryan Boone; Adriana Lleras-Muney; Jonathan Vogel
Abstract: The 1940s witnessed substantial reductions in the Black-white earnings gap. We study the role that domestic WWII defense production played in reducing this gap. Exploiting variation across labor markets in the allocation of war contracts to private firms, we find that war production contracts resulted in significant increases in the earnings of Black workers and declines in the racial wage gap, with no effect on white workers. This was achieved via occupational upgrading among Black men to skilled occupations. The gains largely persisted through at least 1970. Using a structural model, we show that declines in discrimination (and not migration or changes in productivity) account for all of the occupational upgrading and half of the estimated wage gains associated with the war production effort. Additionally, the war production effort explains one quarter (one seventh) of the overall improvements in racial gaps in occupation allocations (wages) witnessed over this decade. Finally, war spending led to an increase in the high school graduation rate of Black children, suggesting important intergenerational spillovers associated with declines in labor market discrimination.
Keywords: Discrimination; Racial Disparities; Labor Market Outcomes; WWII
JEL Codes: J24; J3; J7; N12; N4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| WWII defense production (H56) | black workers' earnings (J31) |
| WWII defense production (H56) | racial wage gap (J31) |
| occupational upgrading among black men (J62) | black workers' wage gains (J31) |
| declines in discrimination (J71) | occupational upgrading among black men (J62) |
| WWII defense production (H56) | improvements in racial disparities in occupation allocations (J79) |
| WWII defense production (H56) | high school graduation rates among black children (I24) |