IDEAS home Printed from https://ideas.repec.org/p/fip/fedbwp/19-13.html
   My bibliography  Save this paper

Accounting for racial wealth disparities in the United States

Author

Abstract

Using data from the Survey of Consumer Finances, this paper updates and extends previous research on the racial wealth gap in the United States. We explore several hypotheses that help explain differential wealth accumulation by racial groups, including the importance of receiving inheritances and other financial support from relatives and the conditions in local real estate markets. By exploring the disparities among white, black, and Hispanic families, we make new contributions to the literature. We find that observable factors account for the entire wealth gap between white and Hispanic families and most of the gap between white and black families. Differences in human capital, demographics, and family financial support each make substantial contributions to the wealth gaps we observe between white and nonwhite families. Yet a substantial portion of the wealth gap between white and black families remains unaccounted for after a detailed decomposition. This unexplained portion is greater at the top of the wealth distribution.

Suggested Citation

  • Gustavo A. Suarez & Jeffrey P. Thompson, 2019. "Accounting for racial wealth disparities in the United States," Working Papers 19-13, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:19-13
    DOI: 10.29412/res.wp.2019.13
    as

    Download full text from publisher

    File URL: https://www.bostonfed.org/publications/research-department-working-paper/2019/accounting-for-racial-wealth-disparities-in-the-united-states.aspx
    File Function: Summary
    Download Restriction: no
    File URL: https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2019/wp1913.pdf
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.29412/res.wp.2019.13?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    2. Fortin, Nicole & Lemieux, Thomas & Firpo, Sergio, 2011. "Decomposition Methods in Economics," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 1, pages 1-102, Elsevier.
    3. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    4. 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.
    5. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
    6. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    7. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    8. Joseph G. Altonji & Ulrich Doraszelski, 2005. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    9. Pence Karen M., 2006. "The Role of Wealth Transformations: An Application to Estimating the Effect of Tax Incentives on Saving," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-26.
    10. Lisa J. Dettling & Joanne W. Hsu & Lindsay Jacobs & Kevin B. Moore & Jeffrey P. Thompson, 2017. "Recent Trends in Wealth-Holding by Race and Ethnicity : Evidence from the Survey of Consumer Finances," FEDS Notes 2017-09-27, Board of Governors of the Federal Reserve System (U.S.).
    11. Patrick Bayer & Fernando Ferreira & Stephen L. Ross, 2018. "What Drives Racial and Ethnic Differences in High-Cost Mortgages? The Role of High-Risk Lenders," The Review of Financial Studies, Society for Financial Studies, vol. 31(1), pages 175-205.
    12. Jesse Bricker & Alice Henriques & Jacob Krimmel & John Sabelhaus, 2016. "Measuring Income and Wealth at the Top Using Administrative and Survey Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(1 (Spring), pages 261-331.
    13. Chen, Yong & Rosenthal, Stuart S., 2008. "Local amenities and life-cycle migration: Do people move for jobs or fun?," Journal of Urban Economics, Elsevier, vol. 64(3), pages 519-537, November.
    14. Ben Jann, 2008. "The Blinder–Oaxaca decomposition for linear regression models," Stata Journal, StataCorp LP, vol. 8(4), pages 453-479, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. , 2021. "Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance," Working Papers 22-3, Federal Reserve Bank of Boston.
    2. Edward N. Wolff, 2022. "African‐American and Hispanic Income, Wealth and Homeownership since 1989," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 68(1), pages 189-233, March.
    3. Hope Bodenschatz & Gerald Eric Daniels Jr. & Jeffrey P. Thompson, 2023. "Decomposing Lifetime-Earnings Differences between White, Black, and Hispanic Families," Working Papers 23-14, Federal Reserve Bank of Boston.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. , 2021. "Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance," Working Papers 22-3, Federal Reserve Bank of Boston.
    2. Thomas Y. Mathä & Alessandro Porpiglia & Michael Ziegelmeyer, 2014. "Wealth differences across borders and the effect of real estate price dynamics: Evidence from two household surveys," BCL working papers 90, Central Bank of Luxembourg.
    3. Mathä, Thomas Y. & Porpiglia, Alessandro & Ziegelmeyer, Michael, 2017. "Household wealth in the euro area: The importance of intergenerational transfers, homeownership and house price dynamics," Journal of Housing Economics, Elsevier, vol. 35(C), pages 1-12.
    4. Joseph G. Altonji & Ulrich Doraszelski, 2005. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    5. Thomas Y. Mathä & Alessandro Porpiglia & Michael Ziegelmeyer, 2018. "Wealth differences across borders and the effect of real estate price dynamics: Evidence from two household surveys," Journal of Income Distribution, Ad libros publications inc., vol. 26(1), pages 1-35, March.
    6. repec:jid:journl:y:2018:v:26:i:3:p:15-49 is not listed on IDEAS
    7. Tymon Słoczyński, 2015. "The Oaxaca–Blinder Unexplained Component as a Treatment Effects Estimator," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(4), pages 588-604, August.
    8. Sonja C. Kassenboehmer & Mathias G. Sinning, 2014. "Distributional Changes in the Gender Wage Gap," ILR Review, Cornell University, ILR School, vol. 67(2), pages 335-361, April.
    9. Fernando Rios-Avila, 2019. "Recentered Influence Functions in Stata: Methods for Analyzing the Determinants of Poverty and Inequality," Economics Working Paper Archive wp_927, Levy Economics Institute.
    10. Sloczynski, Tymon, 2018. "Average Gaps and Oaxaca's Blinder Decompositions: A Cautionary Tale about Regression Estimates of Racial Differences in Labor Market Outcomes," IZA Discussion Papers 12041, Institute of Labor Economics (IZA).
    11. Girma Gezimu Gebre & Hiroshi Isoda & Dil Bahadur Rahut & Yuichiro Amekawa & Hisako Nomura, 2021. "Gender Gaps in Market Participation Among Individual and Joint Decision-Making Farm Households: Evidence from Southern Ethiopia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(3), pages 649-683, June.
    12. Sloczynski, Tymon, 2015. "Average Wage Gaps and Oaxaca–Blinder Decompositions," IZA Discussion Papers 9036, Institute of Labor Economics (IZA).
    13. Sergio P. Firpo & Nicole M. Fortin & Thomas Lemieux, 2018. "Decomposing Wage Distributions Using Recentered Influence Function Regressions," Econometrics, MDPI, vol. 6(2), pages 1-40, May.
    14. Girma Gezimu Gebre & Hiroshi Isoda & Dil Bahadur Rahut & Yuichiro Amekawa & Hisako Nomura, 0. "Gender Gaps in Market Participation Among Individual and Joint Decision-Making Farm Households: Evidence from Southern Ethiopia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 0, pages 1-35.
    15. Sloczynski, Tymon, 2013. "Population Average Gender Effects," IZA Discussion Papers 7315, Institute of Labor Economics (IZA).
    16. Oscar Molina Tejerina & Luis Castro Peñarrieta, 2020. "Unexplained Wage Gaps in the Tradable and Nontradable Sectors: Cross-Sectional Evidence by Gender in Bolivia," Investigación & Desarrollo, Universidad Privada Boliviana, vol. 20(1), pages 5-23.
    17. Anna Lukiyanova, 2013. "Earnings inequality and informal Employment in Russia," HSE Working papers WP BRP 37/EC/2013, National Research University Higher School of Economics.
    18. Zhu, Rong, 2016. "Wage differentials between urban residents and rural migrants in urban China during 2002–2007: A distributional analysis," China Economic Review, Elsevier, vol. 37(C), pages 2-14.
    19. Johar, Meliyanni & Jones, Glenn & Keane, Micheal P. & Savage, Elizabeth & Stavrunova, Olena, 2013. "Discrimination in a universal health system: Explaining socioeconomic waiting time gaps," Journal of Health Economics, Elsevier, vol. 32(1), pages 181-194.
    20. Trinh Thi, Huong & Simioni, Michel & Thomas-Agnan, Christine, 2018. "Decomposition of changes in the consumption of macronutrients in Vietnam between 2004 and 2014," Economics & Human Biology, Elsevier, vol. 31(C), pages 259-275.
    21. Domenico Depalo & Raffaela Giordano & Evangelia Papapetrou, 2015. "Public–private wage differentials in euro-area countries: evidence from quantile decomposition analysis," Empirical Economics, Springer, vol. 49(3), pages 985-1015, November.

    More about this item

    Keywords

    racial wealth gap; inequality; inheritance; savings;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:19-13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Spozio (email available below). General contact details of provider: https://edirc.repec.org/data/frbbous.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.