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The Racial Saving Gap Enigma: Unraveling the Role of Institutions

  • Belton, Willie
  • Uwaifo Oyelere, Ruth

It has been well documented in the literature that ethnicity matters significantly in the determination of savings. In particular, African-American savings lag far behind that of other ethnic groups. Similarly, the literature also provides evidence of the long-lived nature of institutions and the link between institutions and culture. In this paper, we provide an explanation for the savings gap that still exists between African-Americans and White Americans even after accounting for appropriate factors that can lead to savings differentials. We initially provide evidence that the savings gap exists and persist after including several control variables in a regression analysis. We then provide evidence that the persistent gap can not be attributed solely to racial discrimination but can be explained by the response of culture to institutional scaffolding erected many years earlier. Using a novel within race decomposition we provide evidence that past institutions transmitted through culture can help to explain this persistent saving disparity.

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File URL: http://purl.umn.edu/37089
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 37089.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:37089
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  1. Francine D. Blau & John W. Graham, 1990. "Black-White Differences in Wealth and Asset Composition," NBER Working Papers 2898, National Bureau of Economic Research, Inc.
  2. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  3. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2007. "Conspicuous Consumption and Race," NBER Working Papers 13392, National Bureau of Economic Research, Inc.
  4. Charles Yuji Horioka & Junmin Wan, 2007. "The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 2077-2096, December.
  5. Smith, J.P., 1996. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Papers 96-12, RAND - Reprint Series.
  6. Lisa A. Keister, 2000. "Family Structure, Race, and Wealth Ownership: A Longitudinal Exploration of Wealth Accumulation Processes," Macroeconomics 0004051, EconWPA.
  7. James P. Smith & Michael P. Ward, 2004. "Asset Accumulation and Family Size," Labor and Demography 0403001, EconWPA.
  8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
  9. Kerwin Kofi Charles & Erik Hurst, 2002. "The Transition To Home Ownership And The Black-White Wealth Gap," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 281-297, May.
  10. Lisa A. Keister, 2000. "Family Structure, Race, and Wealth Ownership: A Longitudinal Exploration of Wealth Accumulation Processes," Economics Working Paper Archive wp_304, Levy Economics Institute.
  11. Dilip Ratha & Sanket Mohapatra & K. M. Vijayalakshmi & Zhimei Xu, 2007. "Remittance Trends 2007," World Bank Other Operational Studies 11024, The World Bank.
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