Do past wealth gaps explain modern inequality? Evidence from immigration to the United States

Recent studies document persistent racial wealth inequality in the United States, often attributing modern disparities to historical differences. But inferring the determinants of long-run racial wealth inequality with aggregated data is complicated by the fact that 30 million European immigrants arrived in the late 19th and early 20th centuries with no direct claim to the wealth accumulated by earlier generations of Americans. Drawing on government data, I find that immigrants arrived with few assets, far behind the native-born population. Yet survey evidence reveals that by the late 20th century, their descendants achieved wealth parity with earlier arriving white ethnic groups. Using a stylized model, I show that this rapid convergence can be explained mostly by immigrants' income growth and plausibly higher savings rates. These findings indicate that initial differences in wealth matter less for long-run outcomes than previously suggested. The results also underscore the central role of race in shaping inequality, consistent with faster economic convergence within than across racial groups.