Root Causes of the Racial Wealth Gap: A Critique of the Fed View

William Darity and Stephan Lefebvre

AEA Papers and Proceedings, 2025, vol. 115, 462-65

Abstract: We address the Federal Reserve's model for Black–White wealth inequality. The Fed view has it that the Black–White wealth gap, when measured with an "expanded wealth concept," is smaller than previously thought and primarily explained by income differences shaped by personal decisions around human capital acquisition and family structure. We argue that the expanded wealth concept inappropriately treats future income flows from Social Security and defined benefit pensions as an asset. Even using this measure, the absolute Black–White wealth gap increases with the adjustment. We present results using the PSID that demonstrate that parental wealth better captures transmission of intergenerational (dis)advantage.

JEL-codes: D31 E58 G51 J15 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/pandp.20251119

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