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The Dynamics of the Racial Wealth Gap

Dionissi Aliprantis (), Daniel Carroll () and Eric Young
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Dionissi Aliprantis: Federal Reserve Bank of Cleveland
Daniel Carroll: Federal Reserve Bank of Cleveland

No 2022-044, Working Papers from Human Capital and Economic Opportunity Working Group

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: racial inequality; wealth dynamics (search for similar items in EconPapers)
JEL-codes: D31 D58 E21 E24 J70 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-dge
Note: MIP
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Alipra ... acial-wealth-gap.pdf First version, November 23, 2022 (application/pdf)

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