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Title: Does 'Ethnic Capital' Matter? Identifying the Role of Ethnic Peer Effects in the Intergenerational Transmission of Ethnic Differentials
Citation Type: Miscellaneous
Publication Year: 2003
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Abstract: The human capital of individuals appears to be correlated with ethnic group averages in the previous generation, even after controlling for the direct effect of parental investment in the human capital of children. This observed association is often interpreted as evidence for ethnic peer effects, but it might be confounded by omitted variables and measurement error in parental skills. In order to determine whether, and to what extent, this relationship is caused by ethnic peer effects, I develop the following instrumental variables strategy: (1) the occupational mix of new immigrant arrivals during the Great Migration is used to instrument for ethnic capital, and (2) age at arrival is used to instrument for parental skills. Using 1910 and 1920 US Census data on first- and second generation Americans, I find evidence of a significant ethnic capital effect, confirming that the persistence of skill differentials across individuals is partly attributable to their belonging to particular ethnic groups through a channel independent of their respective parents skills. As expected, the results indicate that OLS estimates significantly understate the role of parental skills and slightly overstate the magnitude of ethnic peer effects, which is consistent with the motivation for using instrumental variables. Finally, a number of specification checks support the notion that geographic concentration and endogamy rates accentuate the effect of ethnic capital by promoting a higher level of interaction among individuals in a given ethnic group.
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Authors: Leon, Alexis
Publisher: Massachusetts Institute of Technolocy
Data Collections: IPUMS USA
Topics: Race and Ethnicity
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