We study the sources of racial and ethnic disparities in income using de-identified longitudinal data covering nearly the entire U.S. population from 1989-2015. We document three sets of results:
First, the intergenerational persistence of disparities varies substantially across racial groups. For example, Hispanic Americans are moving up significantly in the income distribution across generations because they have relatively high rates of intergenerational income mobility. In contrast, black Americans have substantially lower rates of upward mobility and higher rates of downward mobility than whites, leading to large income disparities that persist across generations. Conditional on parent income, the black-white income gap is driven entirely by large differences in wages and employment rates between black and white men; there are no such differences between black and white women.
Second, differences in family characteristics such as parental marital status, education, and wealth explain very little of the black-white income gap conditional on parent income. Differences in ability also do not explain the patterns of intergenerational mobility we document.
Third, the black-white gap persists even among boys who grow up in the same neighborhood. Controlling for parental income, black boys have lower incomes in adulthood than white boys in 99% of Census tracts. Both black and white boys have better outcomes in low-poverty areas, but black-white gaps are larger on average for boys who grow up in such neighborhoods. The few areas in which black-white gaps are relatively small tend to be low-poverty neighborhoods with low levels of racial bias among whites and high rates of father presence among blacks. Black males who move to such neighborhoods earlier in childhood earn more and are less likely to be incarcerated. However, fewer than 5% of black children grow up in such environments.
These findings suggest that reducing the black-white income gap will require efforts whose impacts cross neighborhood and class lines and increase upward mobility specifically for black men.
(For a look at the data: 'Extensive Data Shows Punishing Reach of Racism for Black Boys,' by Emily Badger, Claire Caine Miller, Adam Pearce, and Kevin Quealy. The New York Times) »» The Upshot
About the speaker
Nathaniel Hendren is a Professor of Economics at Harvard University and a Founding Co-Director of the Equality of Opportunity Project. His work is motivated by the question: Do markets provide opportunity? He uses a combination of theoretical and empirical analysis to document the extent of equality of opportunity, understand when and why markets may fail to provide it, quantify the impact of these market failures, and provide tools to normatively evaluate potential policy solutions.
His work has documented the extent of equality of opportunity across a range of domains, from the inability of individuals to purchase insurance, to the difficulties faced by low-income children seeking upward mobility, and more recently the disparities in intergenerational mobility experienced by children of different races. In some cases, forces like asymmetric information prevents market existence, such as insurance markets for those with “pre-existing health conditions. In others, externalities are the primary culprit, as in the case of health insurance for low-income adults. In other cases, low-income families may simply be unable to afford better neighborhoods for their children, even if such investments would pay off in the long run. In many cases, the precise underlying mechanisms are important for understanding the welfare implications of government policies. His work on the marginal value of public funds and efficient welfare weights provide empirical methods to evaluate the cost effectiveness and social value of government policy changes to address market imperfections.
Learn more about Nathaniel Hendren's work