Permanent Income and the Black-White Test Score Gap
University of California, Berkeley, The Richard & Rhoda Goldman School of Public Policy; University of California, Berkeley, College of Letters & Science, Department of Economics; National Bureau of Economic Research (NBER)
US Air Force - Department of Economics and Geosciences
Goldman School of Public Policy Working Paper No. GSPP10-014
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.
Number of Pages in PDF File: 40
Date posted: December 12, 2010
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