Title

Are black men more risk-averse than white men in their choices of occupations?

Date of Award

2000

Availability

Article

Degree Name

Doctor of Philosophy (Ph.D.)

Department

Economics

First Committee Member

Philip Robins, Committee Chair

Abstract

The persistent and pervasive problem of earnings inequality between black and white men is related in part to differences in racial occupational distributions. This study sought to determine if differences in racial occupational distribution could be explained by attitudes toward earnings risks in the labor market. If that was the case, the source of earnings inequality is strictly cultural, and no social or political solution should be offered as a remedy. If on the other hand, it is determined that black men are no more risk-averse than white men, then black men may face different labor market risks than white men. The familiar retorts of discrimination and human capital differences remain prominent.Black men are unemployed at twice the rate of white men for the same level of education, age and experience. They also tend to cluster in occupations that require a high degree of manual dexterity, whereas white men tend to cluster in occupations requiring greater investments in human capital. The occupational dissimilarity index began decreasing after 1940, but has remained virtually flat since 1970, even after stringent enforcement of affirmative action policies. This dissertation seeks to assess whether black men respond to occupational specific earnings variability or risks that are significantly different than white men.A summary of this study suggests that, the hypothesis that black men are more risk-averse than white men in their choices of occupations based on earnings variability should be rejected. This assessment was made by first describing occupation-specific earnings risks as the degree of variability of earnings. Three statistical methodologies were used to draw these conclusions. The first method was the coefficient of variation, which measured relative risk aversion. Secondly, absolute risk aversion was measured the Root Mean Squared Error (RMSE) derived from the labor supply function. This methodology measured the degree of variability in earnings, controlling for education, experience, and region of employment, SMSA location and race. The third method of analysis was the feasible general least squared model (FGLS), which measured within occupation earnings variability. Since the choice of occupation primarily reflects the preference of each worker, an occupational-earnings preference function is assumed. By all measures, this study concluded that black men are not significantly more risk-averse than white men in their choices of occupations based on earnings risks or variability.

Keywords

Black Studies; Economics, Labor; Psychology, Industrial

Link to Full Text

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