Working Paper
The Dynamics of the Racial Wealth Gap
Abstract: We reconcile the large and persistent racial wealth gap with the smaller racial earnings gap, using a general equilibrium heterogeneous-agents model that matches racial differences in earnings, wealth, bequests, and returns to savings. Given initial racial wealth inequality in 1962, our model attributes the slow convergence of the racial wealth gap primarily to earnings, with much smaller roles for bequests or returns to savings. Cross-sectional regressions of wealth on earnings using simulated data produce the same racial gap documented in the literature. One-time wealth transfers have only transitory effects unless they address the racial earnings gap.
Keywords: Wealth Dynamics; Racial Inequality;
JEL Classification: D31; D58; E21; E24; J7;
https://doi.org/10.26509/frbc-wp-201918
Access Documents
File(s):
File format is text/html
https://doi.org/10.26509/frbc-wp-201918
Description: Full text
Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers
Publication Date: 2019-10-08
Number: 19-18
Related Works
- Working Paper Revision: The Dynamics of the Racial Wealth Gap