What Is Behind the Persistence of the Racial Wealth Gap?

Abstract

Most studies of the persistent gap in wealth between whites and blacks have investigated the large gap in income earned by the two groups. Those studies generally concluded that the wealth gap was “too big” to be explained by differences in income. We study the issue using a different approach, capturing the dynamics of wealth accumulation over time. We find that the income gap is the primary driver behind the wealth gap and that it is large enough to explain the persistent difference in wealth accumulation. The key policy implication of our work is that policies designed to speed the closing of the racial wealth gap would do well to focus on closing the racial income gap.

A subaltern middle class: The case of the missing “Black bourgeoisie” in America

“…They are significantly less able to transfer an improved wealth position to their children. Furthermore, contrary to the claim made in a recent study by Aliprantis and Carroll (2019) also using the SCF, higher levels of income will not translate into levels of wealth sufficiently high enough for Blacks to eliminate the Black–White wealth disparity. Aliprantis and Carroll downplay the importance of intergenerational effects by treating those effects as being narrowly associated with inheritances.…”

Housing Market Appreciation and the White-Black Wealth Gap

“…The magnitude of the White-Black wealth gap is the consequence of historical discrimination against and persecution of Black families that has hindered their ability to collect and maintain wealth, including (among other factors) the institution of slavery, reduced access to credit and the plundering of Black property under Jim Crow laws, persistent labor market discrimination, the exclusion of Black workers from Social Security and Black World War II veterans from GI mortgages and education subsidies, the rise of mass incarceration, and legally enforced residential segregation (e.g., Oliver and Shapiro 1995;Conley 1999;Katznelson 2005;Rothstein 2017;Lee 2019). Indeed, research has found persistently wide White-Black wealth gaps dating back to the first United States household wealth surveys post-World War II (Aliprantis and Carroll 2019;Kuhn, Schularick, and Steins 2020), with evidence for White-Black asset gaps dating back even further (e.g., Collins and Margo 2011).…”

“…What accounts for this recent rise in the White-Black wealth gap? While scholars have pointed to racial differences in labor income as an important driver of the White-Black wealth gap (e.g., Altonji and Doraszelski 2005;Aliprantis and Carroll 2019;Ashman and Neumuller 2020), the remarkable stability of White-Black income ratios (e.g., Manduca 2018) suggests that changes in relative income between White and Black workers are unlikely to account for these widening racial wealth disparities.…”

Monetary Policy and Racial Inequality

“…This channel is often emphasized in policy discussions(Aliprantis and Carroll (2019) and there is evidence(Carpenter and Rodgers, 2004;Rodgers, 2008) that an accommodative policy reduces the racial gap in the unemployment rate. In the words of Atlanta Fed President Bostic (see footnote 2): "The Federal Reserve acts to create a foundation upon which businesses, families, and communities can thrive.…”