Understanding and Quantifying Aspects of the Black-White Wealth Gap in the United States
55 Pages Posted: 30 Mar 2021 Last revised: 1 Nov 2021
Date Written: October 30, 2021
This paper analyzes and quantifies how differences in the wealth levels of Black and White Americans relate to socioeconomic characteristics, including education, occupation, asset portfolio structures, inheritance and financial literacy, using data from the 2016 Survey of Consumer Finances. Some combination of inheritance, education and occupation is significantly related to differences in wealth levels across the races. However, education, homeownership, business ownership and financial literacy are not by themselves pathways even to reducing wealth gaps, let alone eliminating them. Much of the wealth gap is related to unmeasured structural or systemic factors, rather than measured characteristics: this is estimated by a decomposition of overall wealth differences into those associated with characteristics or endowments, and those with differential impacts (estimated by regression coefficients) across groups. Some of the empirical approaches in the estimates are relatively novel in the context of quantifying individual and systemic contributors to the racial wealth gap. Additionally, quantile regressions, which allow for different impacts of characteristics at different portions of the wealth distribution, enable some inferences about the role of class vs. race. The results reinforce the view that race matters for the wealth gap, even after accounting for class.
Keywords: wealth inequality, racial inequality, education, inheritance, wealth patterns
JEL Classification: D31, D63, G51, J15
Suggested Citation: Suggested Citation