Black-White incentive inequality for college persistence

Abstract

Despite similar educational aspirations, black students persist in higher education at much lower rates than white undergraduates. This paper advances a theoretical explanation for the racial gap in persistence by examining whether the differential attrition in college reflects contrasting incentives for educational persistence. To account for the highly unequal hurdles faced by black men and women in college and in the labor market, we propose a method that addresses race-gender-specific opportunity structures in both institutions simultaneously. This approach is based on forward-looking estimates of outcomes where students draw information from their race-gender reference group ahead of them. The model estimates the earnings payoffs of persistence separately for each race-gender group at three consecutive educational decision nodes: at high school graduation, college entry, and after one year in college. We subsequently apply one version of this model to data from the American Community Surveys (2001–2017), calculating the absolute and relative incentives for educational persistence across racial groups. In addition to large dollar earnings differentials, the analyses reveal striking racial gaps of the relative incentives to stay enrolled: “incentive inequality.” This incentive race gap is largest at the earliest stages of the higher education career—high school graduation and college entry—where the black undergraduate dropout rate is highest. Our findings have substantive and methodological implications for situations where returns to investments are unequal across groups affected by discrimination.