Racial Wealth Gap Research Articles

Racial Wealth Gains and Gaps: Ten Economic Facts About the Disparities

Racial Wealth Gains and Gaps: Ten Economic Facts About the Disparities

Review of “Before Gentrification: The Creation of DC’s Racial Wealth Gap.”

Review of “Before Gentrification: The Creation of DC’s Racial Wealth Gap.”

Teaching discrimination in introductory economics: An approach incorporating stratification economics

The authors of this article describe how instructors can incorporate stratification economics (SE) into coverage of discrimination in introductory economics. SE is an economics subfield that provides a framework for understanding how collective action to maintain relative group position can create and sustain economic inequality. They illustrate how to modify Becker’s employer discrimination model to incorporate collective action by identity groups and demonstrate the use of game theory to help students understand the formation and maintenance of group identity. Finally, they show how instructors can use discussion of the racial wealth gap as an opportunity for students to apply elements of the SE framework. Introducing a more relatable and relevant discussion of discrimination and inequality can deepen students’ appreciation for and understanding of economic theory.

You Cannot Make My Blackness a Burden: How America Uses Taxation To Maintain the Racial Wealth Gap and Prevent Black Flourishment

You Cannot Make My Blackness a Burden: How America Uses Taxation To Maintain the Racial Wealth Gap and Prevent Black Flourishment

Housing Market Appreciation and the White-Black Wealth Gap

Abstract Real house prices in the United States have risen by 55 percent over the last four decades, driving substantial wealth benefits to homeowners. However, research has not explored how this rise in house prices has affected White-Black wealth gaps, or the mechanisms that may underlie this relationship. Using geocoded longitudinal household-level wealth data from the Panel Study of Income Dynamics and tract-level house price index data, I estimate that housing market appreciation between 1984 and 2021 explains 70 percent of the increase in the median White-Black wealth gap over this period. I find that most of this effect is due to White-Black gaps in homeownership, with White-Black gaps in house values playing a smaller role. In contrast to recent findings about racialized housing markets, I do not find that gaps in neighborhood house price appreciation between White and Black homeowners contributed to White-Black wealth gaps in the 2000s and 2010s. These results highlight the importance of cumulative advantage processes in driving wealth inequalities and demonstrate how the legacies of institutional racism contribute to contemporary racial wealth gaps.

Busting Myths

Andrew Kahrl's timely book, The Black Tax, examines the racial disparities present in local governmental property tax systems. By examining the property tax regime, he enters the conversation about the role of tax policy in exacerbating the racial wealth gap. The Black Tax expands the conversation about analyzing tax policies through a racialized lens.

Towards design reparations: remedying urban morphologies through policy reform in Harlem, New York

This article critically examines the paradox of housing as a symbol of societal progress in the United States, juxtaposed against the historical legacy of housing segregation, regulatory policy and market biases. It underscores the far-reaching consequences of such policies, which have not only exacerbated the current national housing crisis and widened the racial wealth gap, but also entrenched social inequalities, disproportionately affecting marginalised and minority communities. The article assesses the role of housing market segregation, slum clearance, urban renewal and contemporary zoning regulations and architecture in steering urban development practices, and how they have inadvertently and, in some cases intentionally, hindered equitable spatial opportunities, particularly in housing. Utilising a case study centred on Harlem, New York, this article explores the concept of spatial reparations as a catalyst for policy reform and emergent spatial morphologies that promote redressing both past and current injustices. It emphasises the potential of design-based interventions that materialise from the use of policy as a crucial medium of exploration, in this case for future models of housing-supply innovation. These explorations aim to stimulate meaningful policy and design debates about just-city making, while concurrently serving as a strategic countermeasure to the detrimental consequences of advancing gentrification and related market forces. This research offers a transformative examination of urban housing in the United States and Harlem, challenging traditional perspectives and practices, and advocating for more equitable spatial distribution and opportunities.

Tanya Maria Golash-Boza: Before Gentrification: The Creation of DC’s Racial Wealth Gap

Tanya Maria Golash-Boza: Before Gentrification: The Creation of DC’s Racial Wealth Gap

Racial disparities in debt collection

This paper documents that Black and Hispanic borrowers are 52% more likely to experience a debt collection judgment compared to their counterparts, controlling for socioeconomic variables including income, credit scores, delinquent debt balances, and other relevant credit characteristics. Statistical discrimination mechanisms such as spatially targeting collection efforts based on the likelihood that an attorney represents the defendant or that the defendant will contest the debt in court do not explain the racial gap in judgments. We find support that the judgment gap is partially driven by taste-based discrimination, as evidenced by minorities having less 90-day past due debt balances than non-minority borrowers when controlling for model covariates. Furthermore, the disparity primarily affects non-delinquent borrowers, indicating higher levels of creditor discretion in initiating judgment proceedings. A back-of-the-envelope calculation suggests that the racial wealth gap explains at most 48% of the racial disparity in judgments.

Student Debt Relief and Racial Wealth Gaps

The Biden-Harris Administration released a plan to cancel federal student loans for 43 million borrowers on August 24, 2022. While the Supreme Court struck down the Biden-Harris student debt relief plan on June 30, 2023, the White House is now planning to use the Higher Education Act of 1965, a federal law that governs the student loan program, to bring about relief for student borrowers. This article estimates the potential impact of broad-based student debt relief on racial and ethnic wealth gaps. On average, federal student debt potentially eligible for relief explains 3 percent of the White-Black wealth gaps, suggesting that broad-based student debt relief could significantly mitigate racial wealth inequities.

Setting the Record Straight on Racial Wealth Inequality

The racial wealth gap in the United States is the object of much misrepresentation and misunderstanding. Our paper is intended to provide a corrective. We will address how the mainstream economic view of the drivers of racial disparities in wealth is a human capital view that promotes anti-Black and personal responsibility narratives while ignoring the significance of the racially uneven transmission of resources across generations. It also fails to acknowledge the cumulative impact of US racial history on present wealth gaps.

Analytic Approaches to Measuring the Black-White Wealth Gap

Does the measurement of the racial wealth gap shift depending on the model, method, and dataset used? We contrast the traditional mean Oaxaca-Blinder decomposition with the distributional Recentered Influence Function (RIF) methods. The untransformed, logarithm-transformed, and inverse hyperbolic sine-transformed versions in both the Survey of Consumer Finances and Panel Study of Income Dynamics datasets exhibit similarities. The Oaxaca-Blinder (mean) decomposition highlights that receiving an inheritance explains a larger portion of the racial wealth gap than educational attainment. Conversely, the RIF method at the median suggests that educational attainment accounts for more of the wealth gap than inheritance receipt.

Racial Discrimination in Sourcing: Evidence From Controlled Experiments

Entrepreneurial activity is widely seen as an important tool for addressing the racial wealth gap. However, the survival of minority-owned businesses depends on their ability to win contracts from buyer firms—which might be impacted by buyers’ racial biases. Whether discrimination can exist in sourcing and affect this ability is an unexplored question, perhaps due to an implicit assumption that business-to-business settings are immune from discriminatory biases. In this paper, we use controlled experiments to study whether racial discrimination can affect sourcing decisions. We find that when a supplier's sales manager has a distinctively Black name, buyers are 6.5% less likely (statistically significant at 1% level) to select that supplier compared to a supplier with a sales manager with a distinctively white name. Our findings suggest that equal-opportunity legislation similar to that already in place in the labor market may be needed in the sourcing context. Our findings have implications for executives, suggesting that supplier diversity programs and procurement-bias training can boost corporate performance by expanding the supplier pool, and simultaneously enhance a firm's corporate social responsibility profile.

The Racial Wealth Gap in South Africa and the United States

ABSTRACT We present evidence on the Black–White Racial Wealth Gap in South Africa and compare it to the well-known patterns of the same gap in the United States. We find that the patterns in the overall racial wealth gap are similar between the two countries. In South Africa, the typical Black household owns 5 per cent of the wealth held by the typical White household. In the US, the typical Black household owns 6 per cent of the wealth held by the typical White household. In both countries, a racial wealth gap exists at different levels of education and income. The fact that the racial wealth gap in the US is similar to that of a country that recently emerged from apartheid is a sobering indictment. Conversely, the US presents a grim outlook of the future course of the racial wealth gap in South Africa, especially in the absence of economic redress. The similarities in the evidence between the two countries points to the potential utility of using the Identity Group Stratification framework for understanding racial wealth dynamics in South Africa, an approach that is absent in the literature.

The Limits of Limited Equity Cooperatives: Opportunities and Obstacles to Increasing Black Homeownership and Decreasing the Racial Wealth Gap in Washington D.C.

ABSTRACT This paper focuses on recent governmental initiatives in Washington, D.C. to bolster the long-term physical and financial viability of its limited-equity cooperative housing stock. Drawing on in-depth interviews with members of the DC Limited Equity Cooperative Taskforce, it interrogates the relationship between recent municipal housing policy and the growing asset-based racial wealth gap. The findings indicate that limited-equity cooperatives provide myriad benefits to their residents, yet ultimately fail to curb systemic limitations on black wealth in the property market and rectify historical patterns of racial disparity in the distribution of governmental resources. This paper argues that policy makers must proactively assess how new models of shared equity homeownership affect or even perpetuate racial disparities in wealth and continuously interrogate the structural impacts of affordable housing policy on the (re)distribution of resources in urban centers.

Minority Student Perceptions of the Impact of Financial Cost of Pharmacy School and Career Choice at a Historically Black College and University (HBCU)

ObjectiveOne of the barriers that might prevent an underrepresented minority (URM) individual from pursuing a professional career in the United States is finances. The high disproportionate burden of student debt among URM students further perpetuates the racial wealth gap. Therefore, this study sought to evaluate the extent to which URM students’ personal finance perceptions, and current and projected student loan indebtedness affect postgraduation career intentions. MethodsA cross-sectional analysis was conducted using data from four cohorts of pharmacy students using a survey from November 2, 2022, to February 1, 2023. The financial perception survey included subscales namely personal finance self-efficacy, debt influence and pressure, and risk mitigation and retirement. Descriptive statistics, simple logistic regression, and multivariate logistic regression analyses were conducted. ResultsIn total, 93 students completed the survey and had a mean age of 28.1 ± 5.3 years. Seventy-one percent of the respondents were female, and 67.7 % had completed a 4-year bachelor's degree. There was a significant association between age and the intention to pursue postgraduate training as well as a significant association between risk mitigation and retirement perceptions and intention to pursue postgraduate training after adjusting for other factors. ConclusionAmong students from largely minority backgrounds, age, and confidence in their ability to make wise investment decisions for retirement are associated with a greater likelihood of pursuing postgraduate training opportunities.

Debt‐based welfare: Debt‐to‐asset relationships across Black and White households in the United States

AbstractUnder neoliberal social provision, debt has become a primary tool for US households to pursue economic mobility and manage risk. Borrowing supports financial and non‐financial investments that, in theory, should lead to lifetime income and asset gains from which debt can be repaid. Many scholars argue, however, that reliance on credit as a welfare tool significantly increases inequality, particularly along racial lines. In this paper, I examine this process of debt‐financed asset accumulation by analyzing racial disparities in the relationship between household debt and assets. Using Survey of Consumer Finances data, I examine disparities in assets held at given debt levels across Black and White households. Results indicate that at equal debt levels, Black households' assets are between 30% and 80% lower than those of comparable White households. This suggests that White households benefit considerably more from social policies that center borrowing as a mechanism of social provision. This likely contributes to the persistence of the racial wealth gap. Racial disparities in access to credit, to homeownership, and to non‐market financial transfers like inheritances partly explain White households' higher returns, but racial gaps remain even when accounting for these factors.

Addressing the Racial Wealth Gap and Structural Racism Through Increased Black Entrepreneurship: An Entrepreneurial Ecosystem Perspective

Black households trail other racial groups when it comes to economic factors such as employment, income, and wealth. As discussed in this paper, a significant issue that contributes to these disparities is lower rates of new venture creation and successful business ownership within Black communities. While research has sought to explain this underperformance, no consensus has been reached. Moreover, the role of systemic racism has been underexplored. Improving Black entrepreneurship could help reduce the racial economic gaps and understanding the reasons for diminished Black new venture creation is vital for the development of effective public policy solutions. Utilizing an entrepreneurial ecosystem framework, and a systemic racism theory lens, we discuss challenges faced by Black entrepreneurs and present a model illustrating the issues. It is argued that racism has resulted in lower access to inter-connected resources within Black entrepreneurial ecosystems which has hindered new venture creation and productive entrepreneurship. We provide broad public policy recommendations for improving Black entrepreneurial ecosystems, including greater access to financial capital, mentoring, and entrepreneurship education through Historically Black Colleges and Universities. Practical and theoretical implications are discussed and future research directions are offered.

Inflation, Interest, and the Secular Rise in Wealth Inequality in the United States: Is the Fed Responsible?

Two hallmarks of U.S. monetary policy since the 1981–1982 recession are declining interest rates and moderation in inflation, at least until recently. Coincident with these trends was a surge in U.S. wealth inequality, with the Gini coefficient up by 0.070 between 1983 and 2019. This article analyzes the connection between these two developments on the basis of the Survey of Consumer Finances. Contrary to expectations, the article finds that these two monetary effects reduced wealth inequality rather than increasing it. The effect is quite sizeable, with the Gini coefficient declining by 0.045 over these years. Asset price changes and debt devaluation also accounted for 72.6 percent of the advance of mean wealth and would have led to a 204.9 percent gain in median wealth compared to its actual rise of 23.4 percent. Moreover, they helped lower the racial wealth gap rather than enlarging it. These results are at odds with previous literature in which estimates range from a weak negative effect on inequality to neutral, small positive, and strong positive. In terms of methodology, this article differs from previous work by focusing on only the direct effects of interest rate changes and inflation on the household balance sheet.

Baby Bonds: Saving for America’s Future

Child Development Accounts are government-established and maintained savings accounts for children born to qualifying, generally low-income, families. Often seeded with a cash grant from the government, the savings account can be accessed when the child turns 18 for specific purposes such as financing education, buying a house, or opening a business. While Child Development Account policies have been implemented by some local and state governments, the American Opportunity Accounts Act (AOAA) proposes to establish a Child Development Account for all American children at birth. The sponsors of the AOAA believe that the legislation will reduce income inequality and reduce the racial wealth gap in the United States. An economic analysis of the AOAA predicts that the proposed legislation would incentivize middle-income families to have more children than they otherwise would while also reducing the private saving levels of middle-income families for future child-related expenses. Similar effects are not expected in low- and high-income families. Finally, the results of the analysis demonstrate that if policymakers wish to achieve the maximum possible reduction in the income and racial wealth gap, then AOAA benefits should be limited solely to low-income families.