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
Date Written: June 2019
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: Suggested Citation