The Enduring Effects of Racial Discrimination on Income and Health

Abstract

We investigate the effect of income on the long-standing racial mortality gap in the United States by using evidence from White and Black Civil War veterans who went on to receive postwar pensions. To circumvent endogeneity, we propose an exogenous source of variation in pension income: the judgment of the doctors who certified disability. We find large effects of pension income on longevity; large enough to close the Black–White mortality gap, in principle. However, because physicians discriminated against Blacks when evaluating the existence and severity of disabilities, Blacks received reduced pension benefits that failed to eliminate racial mortality gaps in practice. Our findings shed light on the role of beliefs about race, as opposed to racial animus, in contributing to racial differentials in well-being. (JEL H55, I12, I14, I24, J15, N31)