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The Racial Saving Gap Enigma: Unraveling the Role of Institutions

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Author Info
Belton, Willie () (Georgia Tech)
Uwaifo Oyelere, Ruth () (Georgia Tech)

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Abstract

It has been well documented in the literature that ethnicity matters significantly in the determination of savings. In particular, African-American savings lag far behind savings for other ethnic groups. Similarly, the literature also provides evidence of the long-lived nature of institutions and the link between institutions and culture. In this paper, we provide an explanation for the savings gap that still exists between African-Americans and White Americans even after accounting for appropriate factors that can lead to savings differentials. We initially provide evidence that the savings gap exists and persist after including several control variables in a regression analysis. We then provide evidence that the persistent gap can not be attributed solely to racial discrimination but can be explained by the response of culture to institutional scaffolding erected many years earlier. Using a novel within race decomposition we provide evidence that past institutions transmitted through culture can help to explain this persistent saving disparity.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3545.

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Length: 43 pages
Date of creation: Jun 2008
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Handle: RePEc:iza:izadps:dp3545

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Related research
Keywords: savings gap; institutions; race; culture;

Other versions of this item:

Find related papers by JEL classification:
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities and Races; Non-labor Discrimination
J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James P. Smith & Michael P. Ward, 2004. "Asset Accumulation and Family Size," Labor and Demography 0403001, EconWPA. [Downloadable!]
  2. Charles Yuji Horioka & Junmin Wan, 2006. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," ISER Discussion Paper 0676, Institute of Social and Economic Research, Osaka University, revised Sep 2007. [Downloadable!]
    Other versions:
  3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
    Other versions:
  4. James P. Smith, 2004. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Labor and Demography 0408011, EconWPA. [Downloadable!]
    Other versions:
  5. Lisa A. Keister, 2000. "Family Structure, Race, and Wealth Ownership: A Longitudinal Exploration of Wealth Accumulation Processes," Economics Working Paper Archive 304, Levy Economics Institute, The. [Downloadable!]
  6. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Blau, Francine D & Graham, John W, 1990. "Black-White Differences in Wealth and Asset Composition," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 321-39, May. [Downloadable!] (restricted)
    Other versions:
  8. Lisa A. Keister, 2000. "Family Structure, Race, and Wealth Ownership: A Longitudinal Exploration of Wealth Accumulation Processes," Macroeconomics 0004051, EconWPA. [Downloadable!]
  9. Kerwin Kofi Charles & Erik Hurst, 2002. "The Transition To Home Ownership And The Black-White Wealth Gap," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 281-297, May. [Downloadable!] (restricted)
  10. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2007. "Conspicuous Consumption and Race," NBER Working Papers 13392, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Uwaifo Oyelere, Ruth & Belton, Willie, 2008. "The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment," IZA Discussion Papers 3761, Institute for the Study of Labor (IZA). [Downloadable!]
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