Intergenerational Economic Mobility and the Racial Wealth Gap
American Economic Review Papers and Proceedings (forthcoming)
11 Pages Posted: 13 Nov 2020 Last revised: 9 Jan 2021
Date Written: January 9, 2021
A growing body of research documents the importance of wealth and the racial wealth gap in perpetuating inequality across generations. We add to this literature by examining the impact of wealth on child income by race, while also extending our analysis to three generations. Our two stage least squares regressions reveal that grand-parental and parental wealth and the younger generation’s household income is strongly positively correlated. We further explore the relationship between income and wealth by decomposing the child’s income by race. We find that the disparity in income between black and white respondents is mainly attributable to differences in family background. In context, differences in family background are stronger than differences in educational attainment. When we examine different income percentiles, however, we find that the effect of grand-parental and parental wealth endowment is much stronger at the top of the income distribution. These findings indicate that wealth is an important source of inequality, and that policymakers should seek to address the wealth gap explicitly to decrease inequality in outcomes.
Keywords: inter-generational mobility, race, wealth
JEL Classification: D31, J15, J62, Z13
Suggested Citation: Suggested Citation