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Does Wealth Explain BlackWhite Differences in Early Employment Careers?

  • Rendon, Silvio

This paper inquires on the effect of initial wealth in racial differences in early employment careers. I set up a dynamic model in which people simultaneously search for a job and accumulate wealth, and fit it to data from the National Longitudinal Survey (1979-cohort). With the recovered behavioral parameters, I perform regime changes consisting in giving blacks (i) the initial wealth distribution, and (ii) the arrival rates and wage offer distribution of whites. These counterfactual experiments show that initial wealth has a modest influence in the black-white difference in early employment careers in comparison with labor market variables.

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Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 25 (2007)
Issue (Month): (October)
Pages: 484-500

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Handle: RePEc:bes:jnlbes:v:25:y:2007:p:484-500
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  1. Joseph Altonji & Ulrich Doraszelski & Lewis M. Segal, 2000. "Black/white differences in wealth," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 38-50.
  2. Joseph G. Altonji & Ulrich Doraszelski, 2001. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," NBER Working Papers 8473, National Bureau of Economic Research, Inc.
  3. Nancy Jianakoplos & Paul Menchik & Owen Irvine, 1989. "Using Panel Data to Assess the Bias in Cross-sectional Inferences of Life-Cycle Changes in the Level and Composition of Household Wealth," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 553-644 National Bureau of Economic Research, Inc.
  4. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
  5. Francine D. Blau & John W. Graham, 1989. "Black-White Differences in Wealth and Asset Composition," NBER Working Papers 2898, National Bureau of Economic Research, Inc.
  6. Smith, J.P., 1996. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Papers 96-12, RAND - Reprint Series.
  7. Maury Gittleman & Edward N. Wolff, 2004. "Racial Differences in Patterns of Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 39(1).
  8. Audra J. Bowlus & Zvi Eckstein, 1998. "Discrimination and Skill Differences in an Equilibrium Search Model," Tinbergen Institute Discussion Papers 98-112/3, Tinbergen Institute.
  9. Derek A. Neal & William R. Johnson, 1995. "The Role of Pre-Market Factors in Black-White Wage Differences," NBER Working Papers 5124, National Bureau of Economic Research, Inc.
  10. Robert W. Fairlie & Bruce D. Meyer, 1996. "Ethnic and Racial Self-Employment Differences and Possible Explanations," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 757-793.
  11. Smith, James P & Welch, Finis R, 1989. "Black Economic Progress after Myrdal," Journal of Economic Literature, American Economic Association, vol. 27(2), pages 519-64, June.
  12. Wolff, Edward N, 1994. "Trends in Household Wealth in the United States, 1962-83 and 1983-89," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 40(2), pages 143-74, June.
  13. Lazear, Edward, 1979. "The Narrowing of Black-White Wage Differentials Is Illusory," American Economic Review, American Economic Association, vol. 69(4), pages 553-64, September.
  14. Keane, Michael P & Wolpin, Kenneth I, 2000. "Eliminating Race Differences in School Attainment and Labor Market Success," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 614-52, October.
  15. Rendón, Silvio, 2002. "Job search and asset accumulation under borrowing constraints," UC3M Working papers. Economics we025219, Universidad Carlos III de Madrid. Departamento de Economía.
  16. James J. Heckman & Christopher J. Flinn, 1982. "New Methods for Analyzing Structural Models of Labor Force Dynamics," NBER Working Papers 0856, National Bureau of Economic Research, Inc.
  17. Coppejans, Mark & Sieg, Holger, 2005. "Kernel Estimation of Average Derivatives and Differences," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 211-225, April.
  18. Menchik, Paul L & Jianakoplos, Nancy Ammon, 1997. "Black-White Wealth Inequality: Is Inheritance the Reason?," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 428-42, April.
  19. Derek Neal, 2005. "Why Has Black-White Skill Convergence Stopped?," NBER Working Papers 11090, National Bureau of Economic Research, Inc.
  20. Fairlie, Robert, 2014. "The Absence of the African-American Owned Business: An Analysis of the Dynamics of Self-Employment," Santa Cruz Department of Economics, Working Paper Series qt49c4n0fg, Department of Economics, UC Santa Cruz.
  21. Zvi Eckstein & Kenneth I. Wolpin, 1999. "Estimating The Effect Of Racial Discrimination On First Job Wage Offers," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 384-392, August.
  22. Donghoon Lee, 2005. "An Estimable Dynamic General Equilibrium Model Of Work, Schooling, And Occupational Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 1-34, 02.
  23. Orazem, Peter F, 1987. "Black-White Differences in Schooling Investment and Human Capital Production in Segregated Schools," American Economic Review, American Economic Association, vol. 77(4), pages 714-23, September.
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