Updating the Racial Wealth Gap

68 Pages Posted: 17 Nov 2017

See all articles by Jeffrey P. Thompson

Jeffrey P. Thompson

New England Public Policy Institute, Federal Reserve Bank of Boston; Federal Reserve Board of Governors

Gustavo Suarez

Board of Governors of the Federal Reserve System

Date Written: 2015-08-22

Abstract

Using newly available data from the Survey of Consumer Finances, this paper updates and extends the literature exploring the racial wealth gap. We examine several hypotheses proposed by previous researchers, including the importance of inherited wealth and other family support and that of trends in local real estate markets, and also extend the literature by exploring the gap across the distribution of wealth and simultaneously considering white, African American and Hispanic households. The findings indicate that observable factors account for all of wealth gap between white and Hispanic households and most of the gap between white and black families – more than in most previous research – but a substantial unexplained portion remains. Wealth differences between black and white families are completely due to different asset holdings, while wealth differences between black and Hispanic families are mostly a result of different debt holdings. Home ownership and educational attainment are the single largest observable factors that account for the racial wealth gaps, with income and financial assistance from family members playing important roles as well. The unexplained portion of the wealth gap between white and non-white families is greater at the top of the wealth distribution.

Keywords: Inequality, Racial Wealth Gap, Saving

JEL Classification: D14, D31, D63, J15

Suggested Citation

Thompson, Jeffrey P. and Suarez, Gustavo, Updating the Racial Wealth Gap (2015-08-22). FEDS Working Paper No. 2015-76, Available at SSRN: https://ssrn.com/abstract=3072923 or http://dx.doi.org/10.17016/FEDS.2015.076r1

Jeffrey P. Thompson (Contact Author)

New England Public Policy Institute, Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Federal Reserve Board of Governors ( email )

Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/jeffrey-p-thompson.htm

Gustavo Suarez

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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