The Dynamics of the Racial Wealth Gap

35 Pages Posted: 11 Oct 2019

See all articles by Dionissi Aliprantis

Dionissi Aliprantis

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Daniel Carroll

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Eric R. Young

University of Virginia

Date Written: October 8, 2019

Abstract

We reconcile the large and persistent racial wealth gap with the smaller racial earnings gap, using a general equilibrium heterogeneous-agents model that matches racial differences in earnings, wealth, bequests, and returns to savings. Given initial racial wealth inequality in 1962, our model attributes the slow convergence of the racial wealth gap primarily to earnings, with much smaller roles for bequests or returns to savings. Cross-sectional regressions of wealth on earnings using simulated data produce the same racial gap documented in the literature. One-time wealth transfers have only transitory effects unless they address the racial earnings gap.

Keywords: Racial Inequality, Wealth Dynamics

JEL Classification: D31, D58, E21, E24, J7

Suggested Citation

Aliprantis, Dionissi and Carroll, Daniel and Young, Eric R., The Dynamics of the Racial Wealth Gap (October 8, 2019). FRB of Cleveland Working Paper No. 19-18, October 2019, Available at SSRN: https://ssrn.com/abstract=3467718 or http://dx.doi.org/10.2139/ssrn.3467718

Dionissi Aliprantis (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Daniel Carroll

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Eric R. Young

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

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