Using data from the National Longitudinal Survey of Youth for the years 1979–88, the author examines the extent to which black-white differences in educational attainment, educational quality, and unmeasured individual ability can explain black-white wage differences. An analysis that corrects for both selectivity and ability biases inherent in estimating the education-wage relationship shows that the main source of the black-white wage differential is the racial difference in the quality rather than quantity of schooling. In fact, the author concludes, closing the racial gap in the basic skills learned in school could reduce the wage differential by two-thirds.
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