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What Is Behind the Persistence of the Racial Wealth Gap?

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  • Dionissi Aliprantis
  • Daniel R. Carroll

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.

Suggested Citation

  • Dionissi Aliprantis & Daniel R. Carroll, 2019. "What Is Behind the Persistence of the Racial Wealth Gap?," Economic Commentary, Federal Reserve Bank of Cleveland, issue February.
    • Handle: RePEc:fip:fedcec:00095
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    References listed on IDEAS

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    1. Hero Ashman & Seth Neumuller, 2020. "Can Income Differences Explain the Racial Wealth Gap: A Quantitative Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 220-239, January.
    2. Maury Gittleman & Edward N. Wolff, 2004. "Racial Differences in Patterns of Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 39(1).
    3. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
    4. Dionissi Aliprantis & Daniel R. Carroll & Eric R. Young, 2019. "The Dynamics of the Racial Wealth Gap," Working Papers 201918, Federal Reserve Bank of Cleveland.
    5. Dionissi Aliprantis & Daniel R. Carroll & Eric R. Young, 2019. "What Explains Neighborhood Sorting by Income and Race?," Working Papers 201808R, Federal Reserve Bank of Cleveland.
    6. Menchik, Paul L & Jianakoplos, Nancy Ammon, 1997. "Black-White Wealth Inequality: Is Inheritance the Reason?," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 428-442, April.
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