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Permanent Income and the Black-White Test Score Gap

  • Rothstein, Jesse
  • Wozny, Nathan

Analysts often examine the black-white test score gap conditional on family income. Typically only a current income measure is available. We argue that the gap conditional on permanent income is of greater interest, and we describe a method for identifying this gap using an auxiliary data set to estimate the relationship between current and permanent income. Current income explains only about half as much of the black-white test score gap as does permanent income, and the remaining gap in math achievement among families with the same permanent income is only 0.2 to 0.3 standard deviations in the CNLSY and ECLS samples. When we add permanent income to the controls used by Fryer and Levitt (2006), the unexplained gap in 3rd grade shrinks below 0.15 SDs, less than half of what is found with their controls.

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Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt86k5x83k.

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Date of creation: 01 Mar 2011
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Handle: RePEc:cdl:indrel:qt86k5x83k
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  1. 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.
  2. Bhashkar Mazumder, 2003. "Revised estimates of intergenerational income mobility in the United States," Working Paper Series WP-03-16, Federal Reserve Bank of Chicago.
  3. Gordon B. Dahl & Lance Lochner, 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," American Economic Review, American Economic Association, vol. 102(5), pages 1927-56, August.
  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, vol. 40(1).
  5. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  6. 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 qt9bn6m1hs, Center for Studies in Higher Education, UC Berkeley.
  7. 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.
  8. 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, vol. 104(5), pages 869-95, October.
  9. Bhashkar Mazumder, 2002. "The Mis-Measurement of Permanent Earnings: New Evidence from Social Security Earnings Data," Working Papers 02-12, Center for Economic Studies, U.S. Census Bureau.
  10. Roland G. Fryer & Steven D. Levitt, 2005. "The Black-White Test Score Gap Through Third Grade," NBER Working Papers 11049, National Bureau of Economic Research, Inc.
  11. Atsushi Inoue & Gary Solon, 2005. "Two-Sample Instrumental Variables Estimators," NBER Technical Working Papers 0311, National Bureau of Economic Research, Inc.
  12. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
  13. 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.
  14. 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.
  15. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 425-467, May.
  16. Darren Lubotsky & Martin Wittenberg, 2001. "Interpretation of Regressions with Multiple Proxies," Econometrics 0110005, EconWPA.
  17. Elizabeth M. Caucutt & Lance Lochner, 2005. "Borrowing constraints on families with young children," Proceedings, Federal Reserve Bank of Cleveland, pages 39-48.
  18. 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.
  19. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
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