This paper inquires on the effect of initial wealth in racial
differences in early employment careers. I set up a dynamic model in
which people simultaneously search for a job and accumulate wealth, and
fit it to data from the National Longitudinal Survey (1979-cohort). With
the recovered behavioral parameters, I perform regime changes consisting
in giving blacks (i) the initial wealth distribution, and (ii) the arrival
rates and wage offer distribution of whites. These counterfactual experiments
show that initial wealth has a modest influence in the black-white
difference in early employment careers in comparison with labor market
variables. |