Paper # Author Title
A large empirical literature documents a rise in wage inequality in the American economy. It is silent on whether the increase in inequality is due to greater heterogeneity in the components of earnings that are predictable by agents or whether it is due to greater uncertainty faced by agents. Applying the methodology of Cunha, Heckman, and Navarro (2005) to data on agents making schooling decisions in different economic environments, we join choice data with earnings data to estimate the fraction of future earnings that is forecastable and how this fraction has changed over time. We find that both predictable and unpredictable components of earnings have increased in recent years. The increase in uncertainty is substantially greater for unskilled workers. For less skilled workers, roughly 60% of the increase in wage variability is due to uncertainty.  For more skilled workers, only 8% of the increase in wage variability is due to uncertainty. Roughly 26% of the increase in the variance of returns to schooling is due to increased uncertainty. Using conventional measures of income inequality masks the contribution of rising uncertainty to the rise in the inequality of earnings for less educated groups. Download Paper
Improvements in education and educational quality are widely acknowledged to be major contributors to black economic progress in the Twentieth Century. This paper investigates the sources of improvement in black education in the South in the first half of the century and demonstrates the important roles of social activism, especially NAACP litigation and private philanthropy, in improving the quality and availability of public schooling. Many scholars view education as a rival to social activism in explaining black economic progress, but such a view misses the important role of philanthropic and legal interventions in promoting education. Download Paper