The Determinants of Income Segregation and Intergenerational Mobility: Using Test Scores to Measure Undermatching

67 Pages Posted: 18 Feb 2020

See all articles by Raj Chetty

Raj Chetty

Harvard University

John Friedman

Brown University

Emmanuel Saez

University of California, Berkeley

Nick Turner

Board of Governors of the Federal Reserve System

Danny Yagan

University of California, Berkeley - Department of Economics

Date Written: February 2020

Abstract

We analyze how changes in the allocation of students to colleges would affect segregation by parental income across colleges and intergenerational mobility in the United States. We do so by linking data from tax records on parents' incomes and students' earnings outcomes for each college to data on students' SAT and ACT scores. We find that equalizing application, admission, and matriculation rates across parental income groups conditional on test scores would reduce segregation substantially, primarily by increasing the representation of middle-class students at more selective colleges. However, it would have little impact on the fraction of low-income students at elite private colleges because there are relatively few students from low-income families with sufficiently high SAT/ACT scores. Differences in parental income distributions across colleges could be eliminated by giving low and middle-income students a sliding-scale preference in the application and admissions process similar to that implicitly given to legacy students at elite private colleges. Assuming that 80% of observational differences in students' earnings conditional on test scores, race, and parental income are due to colleges' causal effects — a strong assumption, but one consistent with prior work — such changes could reduce intergenerational income persistence among college students by about 25%. We conclude that changing how students are allocated to colleges could substantially reduce segregation and increase intergenerational mobility, even without changing colleges' educational programs.

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Suggested Citation

Chetty, Raj and Friedman, John and Saez, Emmanuel and Turner, Nick and Yagan, Danny, The Determinants of Income Segregation and Intergenerational Mobility: Using Test Scores to Measure Undermatching (February 2020). NBER Working Paper No. w26748, Available at SSRN: https://ssrn.com/abstract=3539315

Raj Chetty (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

John Friedman

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Emmanuel Saez

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Nick Turner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Danny Yagan

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

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