Black History Month: A reading survey

Black History Month was created to serve as an annual celebration of achievements by African Americans and a time for recognizing their central role in U.S. history. To start a conversation on the role of economics and the history of race in America, and in particular Black history, we selected a survey of recent research pieces by our faculty members. These papers and essays showcase the breadth of disciplines within economics and the questions that are being asked today about our history, and future.

Minimum Wages and Racial Inequality
Ellora Derenoncourt, Claire Montialoux

The difference between white and black workers fell dramatically in the United States in the late 1960s and early 1970s. This article shows that the expansion of the minimum wage played a critical role in this decline. The 1966 Fair Labor Standards Act extended federal minimum wage coverage to agriculture, restaurants, nursing homes, and other services that were previously uncovered and where nearly a third of black workers were employed. The authors digitize over 1,000 hourly wage distributions from Bureau of Labor Statistics industry wage reports and use CPS micro data to investigate the effects of this reform on wages, employment, and racial inequality. Using a cross-industry difference-in-differences design, they show that earnings rose sharply for workers in the newly covered industries. The impact was nearly twice as large for black workers as for white workers. 

Can you move to opportunity? Evidence from the Great Migration
Ellora Derenoncourt

This paper shows that racial composition shocks during the Great Migration (1940-1970) lowered black upward mobility in the northern United States. I identify northern black population increases using a shift-share instrument, interacting pre-1940 black migrants’ location choices with predicted southern county out-migration. The Migration’s effects on children are driven by locational factors, not negative selection of families. Using data I assembled on destinations from 1920-2015, I show the Migration led to persistent segregation and higher police spending, crime, and incarceration from the 1960s onwards. The changes induced by the Migration explain 27% of the region’s racial upward mobility gap today.

Racial Inequality and Minimum Wages in Frictional Labor Markets
Jesse Wursten and Michael Reich 

This paper examines how the racial patchwork of federal and state minimum wage changes between 1990 and 2019 has affected racial wage gaps, with specific attention to effects on labor market frictions. Black workers on average are less likely to live in high-wage states that have raised their wage floors. The effect of state minimum wages on the national racial wage gap is thus not self-evident.

Where is Pollution Moving? Environmental Markets and Environmental Justice
Joseph S. Shapiro and Reed Walker

Do US air pollution offset markets disproportionately relocate pollution to or from low-income or minority communities? Concerns about an equal distribution of environmental quality across communities – environmental justice – have growing policy influence. We relate prices and quantities of offset transactions to demographics of the communities surrounding polluting plants. The authors find little association of offset prices or offset-induced movements in pollution with the share of a community that is Black, Hispanic, or with mean household income. This analysis of twelve prominent offset markets suggests that they do not substantially increase or decrease the equity of environmental outcomes.

What Caused Racial Disparities in Particulate Exposure to Fall? New Evidence from the Clean Air Act and Satellite-Based Measures of Air Quality.
Janet Currie, John Voorheis, Reed Walker

Racial differences in exposure to ambient air pollution have declined significantly in the United States over the past 20 years. This project links restricted-access Census Bureau microdata to newly available, spatially continuous high-resolution measures of ambient particulate pollution to examine the underlying causes and consequences of differences in black-white pollution exposures.

Climate policy, environmental justice, and local air pollution

Meredith Fowlie, Reed Walker, David Wooley

Climate change has become a defining economic issue. It is also, fundamentally, a social justice issue. Investments in climate change mitigation and adaptation could reduce – or increase – social and environmental inequalities in the United States, depending on how climate policies are designed and implemented. A more effective and inclusive response to local air pollution hotspots in historically disadvantaged communities will be politically important for any serious federal or state climate policy initiatives.

In this paper, the authors look to a jurisdiction that has been working to combine stringent climate goals with unprecedented emphasis on social justice and local air quality. Starting with the Global Warming Solutions Act of 2006, California has positioned itself on the leading edge of policy innovation in this space. Under the Global Warming Solutions Act, or AB 32, tensions quickly surfaced as government agencies endeavored to address climate change and local air pollution — two fundamentally different problems — under the same regulatory framework. Disagreements about stakeholder participation, the appropriate scope of policy emphasis, and the role of market-based greenhouse gas (GHG) regulations all posed conflict.

Mortgage Policies and their Effects on Racial Segregation and Upward Mobility
(Paper available by request)
Ulrike Malmendier, Nirupama Kulkarni

Increasing homeownership has long been a major policy goal in the U.S. We argue that two primary policy tools since the 1990s, namely, (i) eased access to mortgages and (ii) targeting underserved neighborhoods, have increased racial segregation and hampered upward mobility for Black families. First, while mortgage policies were effective in increasing overall homeownership, only Black homeownership increased in geographically targeted neighborhoods, while white homeowners decreased. This result is strongest in cities (commuting zones) with improved access to mortgages, which made it easier for white families to move to other neighborhoods. Second, eased access to mortgage financing predicts reduced upward mobility among low-income Black families. For low-income white families, we estimate a negative effect for those remaining in the targeted neighborhood, but a significantly positive effect overall. We then show directly that the mortgage policies predict increased racial segregation, which in turn have a strong negative upward-mobility effect for Black families (and little or no effect for white families). Finally, we investigate the underlying channel. We show that both house values and school quality in targeted neighborhoods decline, likely due to the resulting decline in property taxes and reduced education spending. Additionally, stringent land-use housing restrictions perpetuate racial segregation and prevent Black children from moving to better neighborhoods when they turn into adults.