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The Economic Gains from Equity

Author

Listed:
  • Shelby R. Buckman
  • Laura Choi
  • Mary C. Daly
  • Lily Seitelman

Abstract

How much is inequity costing us? Using a simple growth accounting framework we apply standard shift-share techniques to data from the Current Population Survey (1990-2019) to compute the aggregate economic costs of persistent educational and labor market disparities by gender and race. We find significant economic losses associated with these gaps. Building on this finding, we consider which disparities generate the largest costs, paying specific attention to differences in employment, hours worked, educational attainment, educational utilization, and occupational allocation. We also examine gaps in the returns on these variables. Our findings suggest that differences in employment opportunities and educational attainment make the largest contributions by race; differences in returns on these variables also contribute materially to the total costs. Differences by gender are primarily driven by gaps in employment and hours. Given the disproportionate impact of COVID-19 on the labor market outcomes of women and people of color, as well as the fact that the U.S. population is increasingly racially diverse, these costs will only increase in the future.

Suggested Citation

  • Shelby R. Buckman & Laura Choi & Mary C. Daly & Lily Seitelman, 2021. "The Economic Gains from Equity," Working Paper Series 2021-11, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfwp:91221
    DOI: 10.24148/wp2021-11
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; productivity; labor market gaps; misallocation; equity; covid-19;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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