Ethnic and Racial Disparities in Saving Behavior

The Journal of Economic Inequality, 17(2): 253-283, 2019. Doi.org/10.1007/s10888-018-9400-3

Posted: 15 Mar 2017 Last revised: 15 Jul 2019

See all articles by Mariela Dal Borgo

Mariela Dal Borgo

Bank of Mexico, Financial Stability Directorate

Date Written: June 2019

Abstract

Using data of households approaching retirement in the U.S., I perform quantile decompositions of the Whites’ differences in saving rates with Mexican Americans (ethnic gap) and with African Americans (racial gap). The gaps are small at the bottom half of the distribution and widen at the top, especially those resulting from changes in asset prices (passive savings). Differences in observable factors account for the entire gaps at lower quantiles, but some unexplained racial gap remains at higher quantiles. Thus, racial wealth inequality could be partly attributable to differences in the distributions of saving rates conditional on socio-economic characteristics. Income is the main contributor to the active savings gaps, and education is more important for passive savings. Including retirement assets, the racial but not the ethnic gap in total saving rates disappears. The results suggest that reducing disparities in income, education and pension savings would help to reduce wealth inequality between minorities, particularly Mexican Americans, and Whites.

Keywords: African Americans, Mexican Americans, Saving Rates, Wealth Inequality

JEL Classification: D14, D31, E21, G11, J15

Suggested Citation

Dal Borgo, Mariela, Ethnic and Racial Disparities in Saving Behavior (June 2019). The Journal of Economic Inequality, 17(2): 253-283, 2019. Doi.org/10.1007/s10888-018-9400-3. Available at SSRN: https://ssrn.com/abstract=2931189 or http://dx.doi.org/10.2139/ssrn.2931189

Mariela Dal Borgo (Contact Author)

Bank of Mexico, Financial Stability Directorate ( email )

Av. 5 de Mayo 2
Mexico City, 06059
Mexico

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