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The Role of Permanent Income and Demographics in Black/White Differences in Wealth

Listed author(s):
  • Joseph G. Altonji

    ()

    (Economic Growth Center, Yale University)

  • Ulrich Doraszelski

We explore the extent to which the huge race gap in wealth can be explained with properly constructed income and demographic variables. In some instances we explain the entire wealth gap with income and demographics provided that we estimate the wealth model on a sample of whites. However, we typically explain a much smaller fraction when we estimate the wealth model on a black sample. Using sibling comparisons to control for intergenerational transfers and the effects of adverse history, we find that differences in income and demographics are not likely to account for the lower explanatory power of the black wealth models. Our analysis of growth models of wealth suggests that differences in savings behavior and/or rates of return play an important role.

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File URL: http://www.econ.yale.edu/growth_pdf/cdp850.pdf
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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 850.

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Length: 44 pages
Date of creation: Dec 2000
Handle: RePEc:egc:wpaper:850
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Phone: (203) 432-3610
Fax: (203) 432-3898
Web page: http://www.econ.yale.edu/

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  1. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-399, April.
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  4. James P. Smith, 2004. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Labor and Demography 0408011, EconWPA.
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  8. Joseph Altonji & Ulrich Doraszelski & Lewis M. Segal, 2000. "Black/white differences in wealth," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 38-50.
  9. Robert W. Fairlie & Bruce D. Meyer, 2000. "Trends in Self-Employment among White and Black Men during the Twentieth Century," Journal of Human Resources, University of Wisconsin Press, vol. 35(4), pages 643-669.
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  12. Joseph G. Altonji & Ulrich Doraszelski, 2001. "The Role of Permanent Income and Demographics in Black/White Differences in Wealth," NBER Working Papers 8473, National Bureau of Economic Research, Inc.
  13. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, vol. 68(1), pages 33-53, April.
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  25. 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.
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  31. repec:fth:prinin:446 is not listed on IDEAS
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