January 2016

IZA DP No. 9662: Intergenerational Transmission of Skills and Differences in Labor Market Outcomes for Blacks and Whites

published in: Research in Labor Economics, Special Issue on Inequality: Causes and Consequences, 2016, 43

This paper investigates, theoretically and empirically, differences between blacks and whites in the U.S. concerning the intergenerational transmission of occupational skills and the effects on sons' earnings. The father-son skill correlation is measured by the correlation coefficient (or cosine of the angle) between the father's skill vector and the son's skill vector. The skill vector comprises an individual's occupational characteristics from the Dictionary of Occupational Titles (DOT). According to data from the U.S. National Longitudinal Survey of Youth (NLSY79), white sons earn higher wages in occupations that require skills similar to those of their fathers, whereas black sons in such circumstances incur a wage loss. A large portion of the racial wage gap is explained by the father-son skill correlation. However, a significant unexplained racial wage gap remains at the lower tail of the wage distribution.