Long-Run Differences in Wealth: A Microdata Analysis of US White-Black Differences in Wealth Directly after Mass Emancipation of Southern Slaves

Abstract

This study analyzed racial inequality by decomposing historical black-white differences in wealth using regression decomposition. This technique decomposes economic differences into the portion explained by differences in characteristics and the unexplained portion due to different returns to a set of characteristics (See, e.g., Blinder 1973 and Oaxaca 1973). Preliminary results confirm that the size and source of contemporary black-white wealth differences have historical roots: In 1870, at least 75 percent of white-black wealth differences were not explained by characteristic differences described by the classical model. This is consistent with wealth decompositions of late-twentieth century data that show three-quarters of white-black differences were unexplained (See, e.g., Blau and Graham 1990). Furthermore, this study found that 77.8 percent of white-black wealth differences were not explained in states that abolished slavery well before the Civil War while 87.9 percent of white-black wealth differences were unexplained in states that abolished slavery after the Civil War.