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Racial Differentials in the Wealth Effects of the Financial Crisis and Great Recession


  • Ryan Compton

    () (University of Manitoba)

  • Daniel Giedeman

    () (Grand Valley State University)

  • Leslie Muller

    () (Grand Valley State University)


The financial crisis of 2007–2009 was arguably the most severe financial crisis in American history and the subsequent Great Recession was the worst economic downturn in the USA since the Great Depression. In this paper, we analyze data from the Panel Survey of Income Dynamics (PSID) to examine the effects of the crisis and recession on the wealth of White and Black families using graphical, cross section, and panel empirical models. While other studies have measured the short-term effects of the crisis and recession on American household wealth, we are able to look at longer-term wealth effects by incorporating data from the recently released 2015 wave of the PSID. Our results indicate that the negative consequences of the economic downturn on Black families’ wealth were severe and longer-lasting than for White families.

Suggested Citation

  • Ryan Compton & Daniel Giedeman & Leslie Muller, 2018. "Racial Differentials in the Wealth Effects of the Financial Crisis and Great Recession," Journal of Economics, Race, and Policy, Springer, vol. 1(2), pages 126-141, September.
  • Handle: RePEc:spr:joerap:v:1:y:2018:i:2:d:10.1007_s41996-018-0015-7
    DOI: 10.1007/s41996-018-0015-7

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    References listed on IDEAS

    1. MacKinnon, James G & Magee, Lonnie, 1990. "Transforming the Dependent Variable in Regression Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 315-339, May.
    2. Edward N. Wolff, 2012. "The Asset Price Meltdown and the Wealth of the Middle Class," NBER Working Papers 18559, National Bureau of Economic Research, Inc.
    3. Carlos Gradín, 2014. "Race and Income Distribution: Evidence from the USA, Brazil and South Africa," Review of Development Economics, Wiley Blackwell, vol. 18(1), pages 73-92, February.
    4. Annamaria Lusardi, 2008. "Financial Literacy: An Essential Tool for Informed Consumer Choice?," NFI Working Papers 2008-WP-13, Indiana State University, Scott College of Business, Networks Financial Institute.
    5. Pence Karen M., 2006. "The Role of Wealth Transformations: An Application to Estimating the Effect of Tax Incentives on Saving," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-26, July.
    6. Grinstein-Weiss, Michal & Hun Yeo, Yeong & Zhan, Min & Charles, Pajarita, 2008. "Asset holding and net worth among households with children: Differences by household type," Children and Youth Services Review, Elsevier, vol. 30(1), pages 62-78, January.
    7. Robert, Stephanie A. & Reither, Eric N., 2004. "A multilevel analysis of race, community disadvantage, and body mass index among adults in the US," Social Science & Medicine, Elsevier, vol. 59(12), pages 2421-2434, December.
    8. N. Chiteji & Darrick Hamilton, 2002. "Family connections and the black-white wealth gap among middle-class families," The Review of Black Political Economy, Springer;National Economic Association, vol. 30(1), pages 9-28, June.
    9. Gary A. Hoover & Ryan A. Compton & Daniel C. Giedeman, 2018. "More on the Impact of Economic Freedom on the Black–White Income Gap," Public Finance Review, , vol. 46(2), pages 205-223, March.
    10. Janet Currie & Valentina Duque & Irwin Garfinkel, 2015. "The Great Recession and Mothers' Health," Economic Journal, Royal Economic Society, vol. 125(588), pages 311-346, November.
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    More about this item


    D31; I31; J15;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination


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