Economic Insecurity in the Family Tree and the Racial Wealth Gap

Abstract

A growing body of research documents that middle income households are increasingly facing a higher prevalence of economic insecurity in relatives. Other research demonstrates that poverty and affluence in familial networks can act as contributors to wealth inequality. We use panel data and find that, compared to their white counterparts, third generation middle income black families (adult children) are more prone to have relatives (e.g. siblings, parents, and grandparents) that face poverty, unemployment, and wealth disparity. As a check for consistency, we explore the cousin dimension of the extended family. We find that asset poverty is more pronounced throughout the life course of middle income black cousins, relative to their white peers. A decomposition of the wealth disparity reveals that economic insecurity in the family tree is one of the largest contributors to the black-white wealth gap among middle income earners.

Keywords: stratification economics, wealth, race, middle income, economic insecurity, Oaxaca-Blinder decomposition

JEL Classification: Z13, D31, D64, J15, I3