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Permanent Income and the Black-White Test Score Gap

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  • Jesse Rothstein
  • Nathan Wozny

Abstract

Analysts often examine the black-white test score gap conditional on current family income. We describe a method for identifying the gap conditional on the family’s permanent income. Current income explains only about half as much of the black-white test gap as does permanent income, and the gap among families with the same permanent income is only 0.2 to 0.3 standard deviations in two commonly used samples. When we add permanent income to the controls used by Fryer and Levitt (2006), the unexplained gap in third grade shrinks below 0.15 SDs, less than half of what is found with their controls.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 48 (2013)
Issue (Month): 3 ()
Pages: 510-544

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Handle: RePEc:uwp:jhriss:v:48:y:2013:iii:1:p:510-544

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Web page: http://jhr.uwpress.org/

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  1. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(2), pages 425-467, May.
  2. Gordon B. Dahl & Lance Lochner, 2011. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers, University of Western Ontario, CIBC Centre for Human Capital and Productivity 20113, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  3. Bhashkar Mazumder, 2002. "The Mis-Measurement of Permanent Earnings: New Evidence from Social Security Earnings Data," Working Papers, Center for Economic Studies, U.S. Census Bureau 02-12, Center for Economic Studies, U.S. Census Bureau.
  4. Joseph G. Altonji & Ulrich Doraszelski, 2005. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 40(1).
  5. Blau, Francine D & Grossberg, Adam J, 1992. "Maternal Labor Supply and Children's Cognitive Development," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 474-81, August.
  6. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number frie57-1.
  7. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," NBER Working Papers 11943, National Bureau of Economic Research, Inc.
  8. Elizabeth M. Caucutt & Lance Lochner, 2005. "Borrowing constraints on families with young children," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 39-48.
  9. Roland G. Fryer & Steven D. Levitt, 2006. "The Black-White Test Score Gap Through Third Grade," American Law and Economics Review, Oxford University Press, Oxford University Press, vol. 8(2), pages 249-281.
  10. Darren Lubotsky & Martin Wittenberg, 2001. "Interpretation of Regressions with Multiple Proxies," Econometrics, EconWPA 0110005, EconWPA.
  11. Bhashkar Mazumder, 2003. "Revised estimates of intergenerational income mobility in the United States," Working Paper Series, Federal Reserve Bank of Chicago WP-03-16, Federal Reserve Bank of Chicago.
  12. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, National Bureau of Economic Research, Inc, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
  13. Krueger, Alan & Rothstein, Jesse M & Turner, Sarah, 2006. "Race, Income, and College in 25 Years: Evaluating Justice O'Connor's Conjecture," University of California at Berkeley, Center for Studies in Higher Education, Center for Studies in Higher Education, UC Berkeley qt9bn6m1hs, Center for Studies in Higher Education, UC Berkeley.
  14. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(5), pages 869-95, October.
  15. Atsushi Inoue & Gary Solon, 2005. "Two-Sample Instrumental Variables Estimators," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0311, National Bureau of Economic Research, Inc.
  16. Roland G. Fryer, Jr. & Steven D. Levitt, 2002. "Understanding the Black-White Test Score Gap in the First Two Years of School," NBER Working Papers 8975, National Bureau of Economic Research, Inc.
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  18. Kenneth Y. Chay & Jonathan Guryan & Bhashkar Mazumder, 2009. "Birth Cohort and the Black-White Achievement Gap: The Roles of Access and Health Soon After Birth," NBER Working Papers 15078, National Bureau of Economic Research, Inc.
  19. David M. Blau, 1999. "The Effect Of Income On Child Development," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 261-276, May.
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Cited by:
  1. Fairlie, Robert W. & Hoffmann, Florian & Oreopoulos, Philip, 2011. "A Community College Instructor like Me: Race and Ethnicity Interactions in the Classroom," CLSSRN working papers, Vancouver School of Economics clsrn_admin-2011-27, Vancouver School of Economics, revised 27 Oct 2011.
  2. Bhashkar Mazumder & Jonathan Davis, 2011. "Parental Earnings and Children's Well-Being and Future Success: An Analysis of the SIPP Matched to SSA Earnings Data," Working Papers, Center for Economic Studies, U.S. Census Bureau 11-12, Center for Economic Studies, U.S. Census Bureau.

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