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The Dynamics of the Racial Wealth Gap

Dionissi Aliprantis, Daniel Carroll and Eric Young ()

No 19-18R, Working Papers from Federal Reserve Bank of Cleveland

Abstract: What drives the dynamics of the racial wealth gap? We answer this question using a dynamic stochastic general equilibrium heterogeneous-agents model. Our calibrated model endogenously produces a racial wealth gap matching that observed in recent decades along with key features of the current cross-sectional distribution of wealth, earnings, intergenerational transfers, and race. Our model predicts that equalizing earnings is by far the most important mechanism for permanently closing the racial wealth gap. One-time wealth transfers have only transitory effects unless they address the racial earnings gap, and return gaps only matter when earnings inequality is reduced.

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: 67 pages
Date: 2019-10-08, Revised 2022-11-29
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-201918r

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