Human Capital Choice and the Wage Gap: The Role of Worklife Expectancy and Statistical Discrimination

Abstract

This paper explores the link between worklife expectancy, educational attainment and its impact on the wage gap. A model of statistical discrimination that accounts for the achievement gap and differences in worklife expectancy demonstrates that (a) the achievement gap does not influence educational attainment directly through the choice of human capital, (b) discrimination lowers human capital directly through lower wage offers, and (c) lower worklife expectancy leads to lower human capital accumulation. While sufficient data on worklife expectancy by race and education is not available for a detailed empirical analysis, a simple calibration suggests the importance of the achievement gap and worklife expectancy relative to traditional labor market discrimination.