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The Dynamics of the Racial Wealth Gap

Dionissi Aliprantis, Daniel Carroll and Eric Young ()

No 201918, Working Papers from Federal Reserve Bank of Cleveland

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 (search for similar items in EconPapers)
JEL-codes: D31 D58 E21 E24 J7 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2019-10-08
New Economics Papers: this item is included in nep-dge, nep-lma, nep-mac and nep-ore
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DOI: 10.26509/frbc-wp-201918

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