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. We hypothesize that wealth accumulation will be greatly weakened for middle income households with proximity to a larger kin network of economic hardship. We focus on multiple generations and generational peers because they are members of the same family tree, yet they have grown up in different public policy regimes. Using panel data, we find that, compared to their white counterparts, third generation middle income black families are disproportionately exposed to relatives (siblings, cousins, parents, grandparents) that face poverty, unemployment, and wealth disparity. 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 in the third generation.

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

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