INTERGENERATIONAL TRANSFERS AND THE DISTRIBUTION OF EARNINGS This paper models the dynamics of the earnings distribution among successive generations of workers as a stochastic process. The process arises from the random assignment of abilities to individuals by nature, together with the utility maximizing bequest decisions of their parents. A salient feature of the model is that parents cannot borrow to make human capital investments in their offspring. Consequently the allocation of training resources among the young people of any generation depends upon the distribution of earnings among their parents. This implies in turn that the often noted conflict between egalitarian redistributive policies and economic efficiency is mitigated. A number of formal results are proven which illustrate this fact. 'This paper derives from the author's Ph.D. Thesis. The advice of Professor Robert Solow is gratefully acknowledged and comments of Carl Futia, Sanford Grossman, and Joseph Stiglitz have also been helpful. All errors are. of course, my own. 2~e e , for example. Jencks, et al. [15]. 'see Duncan et al. [lo], Datcher [8], and Jencks, et al. [15]. A discussion of the consequences of this observation for the analysis of racial income differences can be found in Loury [18, Ch. I].

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Race and School Quality Since Brown v. Board of Education THE HISTORY OF RACE and school quality in the United States in the past hundred years has not been one of constant, unyielding progress for black students relative to white students.' Broadly speaking, between 1890 and 1910 the quality of schools attended by black students declined relative to those attended by white students, as judged by expenditures per student, average class size, and the length of the school term. Between 1915 and 1925 black students made moderate progress relative to white students, but the progress stalled between 1925 and the Great Depression. From the mid-1930s to the 1950s, the racial gap in school quality declined dramatically. Unfortunately, recent trends in racial differences in school quality are not nearly as well documented or well understood as those in the period from 1880 to 1950. Ironically, the landmark Supreme Court decision Brown v. Board of Education of Topeka, Kansas, in 1954 greatly curtailed the states' dissemination of data on school quality based on race. Although evi-We are grateful to Kainan Tang for excellent research assistance. We have also benefitted from helpful comments by Orley Ashenfelter, David Card, John Haltiwanger, Jennifer Hochschild, and Glenn Loury. Financial support from the Princeton Industrial Relations Section, National Science Foundation, and Alfred P. Sloan Foundation is gratefully acknowledged. Some of the data utilized in this research were made available by the Interuniversity Consortium for Political and Social Research. 1. Smith (1984); Margo (1990); and Card and Krueger (1992a). This view was also shared by contemporary observers; see Jones (1917); Bond (1934); and DuBois and Dill 7. See Hanushek (1986) for a survey of school resources and test scores. See Card and Krueger (1992b) for evidence on school resources and labor market success. 8. This data set contains information on the racial composition of students in 81,368 schools in 43 states and the District of Columbia. Given this large sample size, our estimates are extremely precise, and we do not, therefore, present standard errors. 9. For the purposes of this paper, black refers to black, non-Hispanic origin, and white refers to white, non-Hispanic origin. The term minority refers to all groups other than white, non-Hispanics. Sources: Data for 1968-80 are from Orfield (1983, p. 14) and are based on U.S. Department of Education data; data for 1989 are authors' calculations based on the Common Core Public School Universe File, Department of Education. Data for Alaska and Hawaii are not included. Data are unavailable for Georgia, Idaho, Maine, Missouri, South Dakota, Virginia, and Wyoming. Results are not reported for border states because the number of Hispanic students is small. Predominantly minority means that more than half of the students in the school are nonwhite. See table I for definitions of regions. Hispanic students, this trend toward increasing segregation may have great consequences.18 NEW HISTORICAL EVIDENCE. At...

This paper examines the allocative performance of rotating savings and credit associations (roseas), a financial institution which is observed world-wide. We develop a model in which individuals save for an indivisible good and study roseas which distribute funds using random allocation and bidding. The allocations achieved by the two types of rosca are compared with that achieved by a credit market and with efficient allocations more generally. We find that neither type of rosea is efficient and that individuals are better off with a credit market than a bidding rosea. Nonetheless, a random rosea may sometimes yield a higher level of ex ante expected utility to prospective participants than would a credit market.

This essay is about the ethical propriety and practical efficacy of a range of policy undertakings which, in the last twenty years, has come to be referred to as “affirmative action.” These policies have been contentious and problematic, and a variety of arguments have been advanced in their support. Here I try to close a gap, as I see it, in this “literature of justification” which has grown up around the practice of preferential treatment. My principal argument along these lines is offered in the next section. I then consider how some forms of argument in support of preferential treatment, distinctly different from that offered here, not only fail to justify the practice but, even worse, work to undermine the basis for cooperation among different ethnic groups in the American democracy. Finally, I observe that as a practical matter the use of group preference can, under circumstances detailed in the sequel, produce results far different from the egalitarian objectives which most often motivate their adoption.It may seem fatuous in the extreme to raise as a serious matter, in the contemporary United States, the question “Why should we care about group inequality?” Is not the historical and moral imperative of such concern self-evident? Must not those who value the pursuit of justice be intensely concerned about economic disparities among groups of persons? The most obvious answer to the title question would seem, then, to be: “We should care because such inequality is the external manifestation of the oppression of individuals on the basis of their group identity.”