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Does Wealth Explain Black-White Differences in Early Employment Careers?

Author

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  • Silvio Rendon

    (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))

Abstract

In this paper I inquire about the effects initial wealth has on black-white differences in early employment careers. I set up a dynamic model in which individuals simultaneously search for a job and accumulate wealth, and fit it to data from the National Longitudinal Survey (1979-cohort). The estimates show that borrowing constraints are tight for both race groups. Regime changes reveal that differences in initial wealth account almost fully for the racial gap in wealth and wages at the beginning of employment careers, but their effect tapers off and completely dissapears several years after graduation. In contrast, differences in the labor market environment and in preferences are shown to account fully for both racial gaps, in wealth and in wages, persisting several years after High School graduation.

Suggested Citation

  • Silvio Rendon, 2006. "Does Wealth Explain Black-White Differences in Early Employment Careers?," Working Papers 0603, Centro de Investigacion Economica, ITAM.
    • Handle: RePEc:cie:wpaper:0603
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    References listed on IDEAS

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    Cited by:

    1. Sílvio Rendon & Alfredo Cuecuecha, 2010. "International job search: Mexicans in and out of the US," Review of Economics of the Household, Springer, vol. 8(1), pages 53-82, March.
    2. Vera, Celia Patricia, 2018. "A structural approach to assessing retention policies in public schools," MPRA Paper 90657, University Library of Munich, Germany.
    3. Gibson, John & Johnson, David, 2017. "Why Bother? Understanding the Impact of Financial Obligations on Wage Selectivity," MPRA Paper 78244, University Library of Munich, Germany.
    4. Gittleman Maury, 2011. "Medicaid and Wealth: A Re-Examination," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-25, November.
    5. Maury Gittleman, 2011. "Medicaid and Wealth: An Examination Using the NLSY79," Working Papers 448, U.S. Bureau of Labor Statistics.
    6. Ivan Grguric, 2005. "Moving up the income ladder? What are the obstacles: a case study of indigenous people in Latin America," Financial Theory and Practice, Institute of Public Finance, vol. 29(4), pages 361-381.
    7. Vera Celia P., 2019. "A Structural Approach to Assessing Retention Policies in Public Schools," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-26, July.

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    More about this item

    Keywords

    Job search; wealth; racial differences; borrowing constraints; consumption; unemployment; estimation of dynamic structural models;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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