The Racial Saving Gap Enigma: Unraveling the Role of Institutions

43 Pages Posted: 16 Jun 2008

See all articles by Willie J. Belton

Willie J. Belton

Georgia Institute of Technology - School of Economics

Ruth Uwaifo Oyelere

Morehouse College; IZA Institute of Labor Economics

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.

Keywords: savings gap, institutions, race, culture

JEL Classification: D14, D31, J15, J11, J71

Suggested Citation

Belton, Willie J. and Uwaifo Oyelere, Ruth, The Racial Saving Gap Enigma: Unraveling the Role of Institutions. IZA Discussion Paper No. 3545, Available at SSRN: https://ssrn.com/abstract=1145924 or http://dx.doi.org/10.2139/ssrn.1145924

Willie J. Belton (Contact Author)

Georgia Institute of Technology - School of Economics ( email )

217 Habersham
Atlanta, GA 30332
United States

Ruth Uwaifo Oyelere

Morehouse College ( email )

Department of Economics
Atlanta, GA 30332
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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