Panel Paper: Permanent Income and the Black-White Test Score Gap

Saturday, November 10, 2012 : 10:55 AM
International C (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Jesse Rothstein, University of California, Berkeley and Nathan Wozny, Mathematica Policy Research

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 two commonly used data sets. 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.

Full Paper: