Simulation Estimation of the Convergence of the Black-White Earnings Gap and Income Dynamics

In this article, the effect of Title VII of the 1964 Civil Rights Act on the convergence of the blackwhite earnings gap and income dynamics is studied through the dynamic panel Tobit models implemented using the simulation estimators. It is found that the blackwhite earnings gap declined moderately after the implementation of Title VII of the 1964 Civil Rights Act in 1965. Based on the simulation studies of wage trajectories, it is also found that the positive impact of the Civil Rights Act on the convergence of the blackwhite earnings gap is especially significant for the group of middle-aged and highly educated workers. Moreover, the rich dynamic structure of the earnings process is identified from the Current Population Survey-Social Security Administration data set. It is shown that the various sources of dynamics in the earnings process are dominated by spurious state dependence for both blacks and whites.