Title: Human Capital and Black-White Earnings Gaps, 1966-2017
Abstract: This paper estimates the contribution of human capital to the Black-white earnings gap in three separate samples of men spanning 1966 through 2017. Human capital is measured using both educational attainment and performance on standardized tests. There are three main findings. First, the reduction in the estimated Black-white earnings gap that occurs after controlling for human capital has become larger over time, suggesting a growing contribution of human capital to Black-white earnings disparities. Second, these increases are almost entirely due to growth in the returns to human capital, which magnify the impact of any racial differences in human capital, rather than increasing racial gaps in the human capital traits themselves. Finally, growth in the explanatory power of human capital has been primarily due to increases in the association between human capital and the likelihood of non-work, and there are no clear increases in the extent to which human capital can account for Black-white gaps in hourly wages or other intensive margin outcomes. Together, these findings highlight how the role of human capital has changed due to structural developments in the US labor market that are racially neutral on their face, such as increasing skill prices and falling labor force participation rates among less skilled men, rather than changing human capital investment decisions among Black men.
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