IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/18930.html

Unemployment risk, portfolio choice, and the racial wealth gap

Author

Listed:
  • Derenoncourt, Ellora
  • Kim, Chi Hyun
  • Kuhn, Moritz
  • Schularick, Moritz

Abstract

Black Americans face higher cyclical unemployment risk than white Americans: job-finding rates during recessions are lower and the risk of becoming long-term unemployed is higher. Differences in unemployment risk across Black and white Americans imply that Black Americans optimally invest less in risky assets. We show that differences in unemployment risk can explain up to 90% of the gap in the stock market shares of Black and white portfolios, resulting in lower returns on wealth for Black Americans. Through this portfolio channel, adverse labor market conditions for Black Americans translate into lower wealth returns and exacerbate racial wealth inequality.

Suggested Citation

  • Derenoncourt, Ellora & Kim, Chi Hyun & Kuhn, Moritz & Schularick, Moritz, 2024. "Unemployment risk, portfolio choice, and the racial wealth gap," CEPR Discussion Papers 18930, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18930
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP18930
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Parakhoniak, Anastasiia & Balakina, Olga & Bäckman, Claes, 2026. "Beyond connectivity: Stock market participation in a network," Journal of Economic Dynamics and Control, Elsevier, vol. 183(C).
    3. Munseob Lee & Claudia Macaluso & Felipe Schwartzman, 2024. "Minority Inflation, Unemployment, and Monetary Policy," Working Paper 24-16, Federal Reserve Bank of Richmond.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:18930. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.