The Role of Permanent Income and Demographics in Black/White Differences in Wealth

62 Pages Posted: 17 Sep 2001  

Ulrich Doraszelski

Harvard University - Department of Economics; University of Pennsylvania - Business & Public Policy Department

Joseph G. Altonji

Yale University - Economic Growth Center; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

Abstract

We explore the extent to which the huge race gap in wealth can be explained with properly constructed income and demographic variables. In some instances we explain the entire wealth gap with income and demographics provided that we estimate the wealth model on a sample of whites. However, we typically explain a much smaller fraction when we estimate the wealth model on a black sample. Using sibling comparisons to control for intergenerational transfers and the effects of adverse history, we find that differences in income and demographics are not likely to account for the lower explanatory power of the black wealth models. Our analysis of growth models of wealth suggests that differences in savings behavior and/or rates of return play an important role.

Suggested Citation

Doraszelski, Ulrich and Altonji, Joseph G., The Role of Permanent Income and Demographics in Black/White Differences in Wealth (September 2001). NBER Working Paper No. w8473. Available at SSRN: https://ssrn.com/abstract=283345

Ulrich Doraszelski

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-2896 (Phone)
617-495-8570 (Fax)

University of Pennsylvania - Business & Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

Joseph G. Altonji (Contact Author)

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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