Racial income disparities in the United States. Discrimination or human capital?

The persistence of race-based income disparities in the United States, particularly between Black and White populations, has been a significant focus of academic research. This study aims to investigate the extent to which differences in average intelligence test performance can account for these income gaps, rather than labour market discrimination or other factors. Utilising five large, nationally representative US datasets, we employ structural equation modelling to adjust our intelligence measures for random measurement error, addressing underestimation of group differences in average intelligence. Our findings reveal that, with the exception of the NLSY97 dataset, performance on intelligence tests mediates the entire income disparity between Black and White individuals when personal income is considered. However, racial gaps in household income persist, indicating that race may influence spousal income and marital choices. This study highlights the importance of accounting for intelligence differences in understanding race-based income disparities.