Working Paper

Updating the Racial Wealth Gap

Abstract: Using newly available data from the Survey of Consumer Finances, this paper updates and extends the literature exploring the racial wealth gap. We examine several hypotheses proposed by previous researchers, including the importance of inherited wealth and other family support and that of trends in local real estate markets, and also extend the literature by exploring the gap across the distribution of wealth and simultaneously considering white, African American and Hispanic households. The findings indicate that observable factors account for all of wealth gap between white and Hispanic households and most of the gap between white and black families ? more than in most previous research ? but a substantial unexplained portion remains. Wealth differences between black and white families are completely due to different asset holdings, while wealth differences between black and Hispanic families are mostly a result of different debt holdings. Home ownership and educational attainment are the single largest observable factors that account for the racial wealth gaps, with income and financial assistance from family members playing important roles as well. The unexplained portion of the wealth gap between white and non-white families is greater at the top of the wealth distribution.

Keywords: Inequality; Racial Wealth Gap; Saving;

JEL Classification: D14; D31; D63; J15;

https://doi.org/10.17016/FEDS.2015.076r1

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2017-11-16

Number: 2015-76

Pages: 67 pages