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Thursday, May 08, 2014

Black–White Differences in Intergenerational Economic Mobility

Bhashkar Mazumder of the Federal Reserve Bank of Chicago

Black–white differences in intergenerational economic mobility in the United States: The large and persistent gap in economic status between blacks and whites in the United States has been a topic of considerable interest among social scientists and policymakers for many decades. The historical legacy of slavery and segregation raises the question of how long black Americans are likely to remain a disadvantaged minority. Despite the enormous literature on black–white inequality and its historical trends, few studies have directly measured black–white differences in rates of intergenerational mobility, that is, the ability of families to improve their position in the income distribution from one generation to the next. Estimates of rates of intergenerational mobility by race can provide insight on whether racial differences in the United States are likely to be eliminated and, if so, how long it might take. Furthermore, they might also help inform policymakers as to whether there are lingering racial differences in equality of opportunity and, if so, what the underlying sources for these differences are.
More generally, the relatively low rate of intergenerational mobility in the United States compared with other industrialized countries has been a growing concern to policymakers across the political spectrum.1 Understanding the sources of racial differences in intergenerational mobility might also shed light on the mechanisms behind the relatively high degree of intergenerational persistence of inequality in the United States. ...
A key finding is that in recent decades, blacks have experienced substantially less upward intergenerational mobility and substantially more downward intergenerational mobility than whites. These results are shown to be highly robust to a variety of measurement issues, such as the concept of income used, the age of the sample members, and the length of the time average used. The results are found in two different data sets that cover different birth cohorts and differ in their gender composition. Moreover, these results utilize relatively large samples of black families, so that racial differences can be shown to be statistically significant. An important implication of the results that has not been shown explicitly before is that if these patterns of mobility were to persist into the future, the implications for racial differences in the “steady-state” distribution of income would be alarming. Instead of eventually “regressing to the mean,” as some traditional measures of intergenerational mobility (when applied to the whole population) would suggest, these results imply that black Americans would make no further relative progress. Of course, it is a strong hypothetical to assume that current rates of mobility will hold in future generations. Indeed, over the past 150 years, there have been clear periods in which the racial gap in economic status has narrowed and it is certainly possible that black–white gaps could converge.4
This study also tries to shed light on which factors are associated with the racial gaps in upward and downward mobility. To be clear, while the analysis is descriptive and not causal, it nonetheless provides some highly suggestive “first-order” clues for the underlying mechanisms leading to black–white differences in intergenerational mobility. It appears that cognitive skills during adolescence, as measured by scores on the Armed Forces Qualification Test (AFQT), are strongly associated with these gaps. ... I do not interpret these scores as measuring innate endowments but rather as reflecting the accumulated differences in family background and other influences that are manifested in test scores.6 If these results are given a causal interpretation, they suggest that actions that reduce the racial gap in test scores could also reduce the racial gap in intergenerational mobility.7
A commonly proposed explanation for racial gaps in achievement has been the relatively high rates of black children growing up with single mothers. I find evidence that for blacks, the lack of two parents in the household throughout childhood does indeed hamper upward mobility. However, patterns in downward mobility are unaffected by family structure for either blacks or whites. Importantly, the negative effects of single motherhood on blacks are only identified in the SIPP, where the entire marital history during the child’s life is available. This highlights the importance of access to data on family structure over long periods rather than a single snapshot at one point in time. I also find that black–white gaps in both upward and downward mobility are significantly smaller for those who have completed 16 years of schooling.8 ...
Finally, I should also note that the focus of this article is on relative mobility across generations and that the measures are relevant for answering questions concerning the progress of blacks relative to whites. It may also be interesting to consider measures of absolute mobility, but that is not the focus of this article. ...[read more]...

    Posted by on Thursday, May 8, 2014 at 08:24 AM in Economics, Income Distribution | Permalink  Comments (1)

          


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