Intergenerational Transmission of Skills and Differences in Labor Market Outcomes for Blacks and Whites

This paper investigates differences between blacks and whites in the intergenerational transmission of occupational skills and the effect of father-son skill correlations on sons’ earnings. We present a model of intergenerational skill transfer and measure the skill correlation between father and son by the angle of the father’s skill vector and the son’s skill vector. Specifically, the vector of skill sets comprises individuals’ occupational characteristics from the Dictionary of Occupational Titles (DOT). Using data from the U.S. National Longitudinal Survey of Youth 1979 (NLSY79), we find skill correlation between fathers and sons, with the correlation for blacks arising from the limited skill sets available to them, and the correlation for whites arising from fathers’ and sons’ choosing similar occupations from a wider variety of skill sets. White sons earn higher wages in occupations that require skills similar to their fathers’, whereas black sons in occupations requiring skills similar to their fathers’ incur a wage loss. This implies a positive transfer of skill-related human capital for whites but not for blacks. Evidence of nepotism is found when sons earn a wage premium for working in the same occupation as their fathers