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The Racial Saving Gap Enigma: Unraveling the Role of Institutions

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  • Belton, Willie
  • Uwaifo Oyelere, Ruth

Abstract

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.

Suggested Citation

  • Belton, Willie & Uwaifo Oyelere, Ruth, 2008. "The Racial Saving Gap Enigma: Unraveling the Role of Institutions," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 37089, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:37089
    DOI: 10.22004/ag.econ.37089
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    6. 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.
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    10. Beverly, Sondra G. & Sherraden, Michael, 1999. "Institutional determinants of saving: implications for low-income households and public policy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 28(4), pages 457-473.
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    Cited by:

    1. Du, Qingyuan & Wei, Shang-Jin, 2016. "A Darwinian perspective on “exchange rate undervaluation”," European Economic Review, Elsevier, vol. 83(C), pages 111-138.
    2. Du, Qingyuan & Wei, Shang-Jin, 2013. "A theory of the competitive saving motive," Journal of International Economics, Elsevier, vol. 91(2), pages 275-289.
    3. Uwaifo Oyelere, Ruth & Belton, Willie, 2010. "Black-White Gap in Self-Employment in the U.S.: Do Cohort and Within Race Differences Exist?," IZA Discussion Papers 5071, Institute of Labor Economics (IZA).
    4. Ruth Oyelere & Willie Belton, 2013. "Black–White gap in self-employment. Does intra-race heterogeneity exist?," Small Business Economics, Springer, vol. 41(1), pages 25-39, June.
    5. Uwaifo Oyelere, Ruth & Belton, Willie, 2008. "The Role of Information and Institutions in Understanding the Black-White Gap in Self-Employment," IZA Discussion Papers 3761, Institute of Labor Economics (IZA).
    6. Uwaifo Oyelere, Ruth & Belton, Willie, 2009. "Coming to America: Does Immigrant's Home Country Economic Status Impact the Probability of Self-Employment in the U.S.?," IZA Discussion Papers 4178, Institute of Labor Economics (IZA).
    7. Mundra, Kusum & Uwaifo Oyelere, Ruth, 2013. "Determinants of Immigrant Homeownership: Examining their Changing Role during the Great Recession and Beyond," IZA Discussion Papers 7468, Institute of Labor Economics (IZA).
    8. Qingyuan Du & Shang-Jin Wei, 2010. "A Sexually Unbalanced Model of Current Account Imbalances," NBER Working Papers 16000, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Institutional and Behavioral Economics; Political Economy;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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