The Contribution of Shareholder Primacy to the Racial Wealth Gap

Roosevelt Institute Working Paper

21 Pages Posted: 6 Mar 2020

See all articles by Lenore Palladino

Lenore Palladino

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics; Franklin & Eleanor Roosevelt Institute

Date Written: February 6, 2020

Abstract

The US racial economic gap is substantial and growing, stemming from a history of racism and the importance of intergenerational transmission to wealth accumulation (Darity and Hamilton 2012); (Chiteji and Stafford 1999). Wealth equity is important because wealth permits economic freedom: the ability to invest in one’s future and the future of one’s children (Darity and Hamilton 2012). This article investigates the role of corporate equities and mutual fund ownership in increasing the racial wealth gap over time. As of the third quarter of 2019, 92.1 percent of corporate equity and mutual fund value was owned by white households. Black households owned 1.5 percent, while Hispanic households owned 1.9 percent. I use the Federal Reserve’s Distributional Financial Accounts to determine the changing impact of the corporate equity gap on the racial wealth gap, and to measure how shareholder payments—dividends and stock buybacks—are divided by race and ethnicity. This original analysis contributes to policy discussions about how to structure the rules for corporate equity ownership in society, and how to end wealth equities that are a legacy of the US’s shameful history of slavery, racism, and xenophobia.

Keywords: Corporate Equity; Distributional Financial Accounts; Racial Wealth Gap; Stock Buybacks; Wealth Inequality

JEL Classification: J15, G3, G5

Suggested Citation

Palladino, Lenore, The Contribution of Shareholder Primacy to the Racial Wealth Gap (February 6, 2020). Roosevelt Institute Working Paper, Available at SSRN: https://ssrn.com/abstract=3526258 or http://dx.doi.org/10.2139/ssrn.3526258

Lenore Palladino (Contact Author)

University of Massachusetts at Amherst - College of Social and Behavioral Sciences - Department of Economics ( email )

Amherst, MA 01003
United States

Franklin & Eleanor Roosevelt Institute ( email )

4079 Albany Post Rd.
Hyde Park, NY 12538
United States

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