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Labor Market Discrimination and Racial Differences in Premarket Factors

  • Carneiro, Pedro


    (University College London)

  • Heckman, James J.


    (University of Chicago)

  • Masterov, Dimitriy V.


    (University of Michigan)

We investigate the relative significance of differences in cognitive skills and discrimination in explaining racial/ethnic wage gaps. We show that cognitive test scores taken prior to entering the labor market are influenced by schooling. Adjusting the scores for racial/ethnic differences in education at the time the test is taken reduces their role in accounting for the wage gaps. We also consider evidence on parental and child expectations about education and on stereotype-threat effects. We find both factors to be implausible alternative explanations for the gaps we observe. We argue that policies need to address the sources of early skill gaps and to seek to influence the more malleable behavioral abilities in addition to their cognitive counterparts. Such policies are far more likely to be effective in promoting racial and ethnic equality for most groups than are additional civil rights and affirmative action policies targeted at the workplace.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1453.

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Length: 46 pages
Date of creation: Jan 2005
Date of revision:
Publication status: published in: Journal of Law and Economics, 2006, 48(1), 1-39
Handle: RePEc:iza:izadps:dp1453
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  1. Hansen, Karsten T. & Heckman, James J. & Mullen, Kathleen, 2003. "The Effect of Schooling and Ability on Achievement Test Scores," IZA Discussion Papers 826, Institute for the Study of Labor (IZA).
  2. Eliana Garces & Duncan Thomas & Janet Currie, 2000. "Longer Term Effects of Head Start," Working Papers 00-20, RAND Corporation Publications Department.
  3. Donohue, John J, III & Heckman, James, 1991. "Continuous versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1603-43, December.
  4. Derek Neal, 2002. "The Measured Black-White Wage Gap Among Women is Too Small," NBER Working Papers 9133, National Bureau of Economic Research, Inc.
  5. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
  6. Yona Rubinstein & James J. Heckman, 2001. "The Importance of Noncognitive Skills: Lessons from the GED Testing Program," American Economic Review, American Economic Association, vol. 91(2), pages 145-149, May.
  7. 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.
  8. James J. Heckman, 1999. "Policies to Foster Human Capital," NBER Working Papers 7288, National Bureau of Economic Research, Inc.
  9. Roland G. Fryer & Steven D. Levitt, 2004. "Understanding the Black-White Test Score Gap in the First Two Years of School," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 447-464, May.
  10. Cunha, Flavio & Heckman, James J., 2007. "The Technology of Skill Formation," IZA Discussion Papers 2550, Institute for the Study of Labor (IZA).
  11. Stephen V. Cameron & James J. Heckman, 1999. "The Dynamics of Educational Attainment for Blacks, Hispanics, and Whites," NBER Working Papers 7249, National Bureau of Economic Research, Inc.
  12. Sandra E. Black & Amir Sufi, 2002. "Who Goes to College? Differential Enrollment by Race and Family Background," NBER Working Papers 9310, National Bureau of Economic Research, Inc.
  13. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  14. Janet Currie & Duncan Thomas, 1998. "School Quality and the Longer-Term Effects of Head Start," NBER Working Papers 6362, National Bureau of Economic Research, Inc.
  15. Robert Bornholz & James J. Heckman, 2004. "Measuring Disparate Impacts and Extending Disparate Impact Doctrine to Organ Transplantation," NBER Working Papers 10946, National Bureau of Economic Research, Inc.
  16. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  17. Melissa Osborne & Herbert Gintis & Samuel Bowles, 2001. "The Determinants of Earnings: A Behavioral Approach," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1137-1176, December.
  18. John Cawley & James Heckman & Edward Vytlacil, 1999. "On Policies To Reward The Value Added By Educators," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 720-727, November.
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