Wealth Outcomes Research Articles

Caste-based Diminished Returns of Educational Attainment on Wealth Accumulation in India.

Education is widely recognized as a key driver of wealth generation, providing individuals with the opportunity to enhance their socioeconomic status. However, the effectiveness of education in generating wealth varies significantly across different social groups. In the United States, research has shown that Black individuals experience weaker economic returns on education compared to their White counterparts, a phenomenon explained by the theory of Minorities' Diminished Returns (MDRs). Although MDRs have been documented in various countries, their relevance to caste-based disparities in India remains unexplored. This study aims to investigate the caste-based diminished returns of education on wealth in India. We hypothesize that the returns on educational attainment, in terms of wealth generation, will be weaker for individuals from Scheduled Castes (SCs) compared to those from higher castes, using data from the India Demographic and Health Surveys (DHS). This study was a cross-sectional analysis of DHS -2019/2021 data from India, examining the relationship between educational attainment and wealth across different caste groups (scheduled castes and non-scheduled castes). Multivariate regression models will be employed to assess the interaction between caste and education in predicting wealth outcomes, controlling for relevant covariates such as age, gender, and region. The study is expected to find that the returns on education, in terms of wealth, are significantly weaker for individuals from Scheduled Castes compared to those from higher castes. This would indicate that caste-based discrimination continues to hinder the economic progress of Scheduled Castes, even when they achieve similar levels of education as their upper-caste counterparts. The findings of this study will extend the MDR framework to the Indian context, demonstrating that caste-based disparities result in diminished returns on education for wealth generation. This study underscores the need for targeted policies that address the specific barriers faced by Scheduled Castes in translating educational attainment into economic success and highlights the ongoing impact of caste-based discrimination in India.

How access to federal recovery credit assistance influences future wealth trajectories after a natural disaster: The case of Hurricane Harvey

Hurricane Harvey made landfall in Texas in August 2017. The Small Business Administration (SBA) provided direct-to-household loan aid for over $2.9 billion to assist recovery, twice as large as the Federal Emergency Management Agency's direct-to-household grant program to individuals impacted by the storm. The author examined the role of federal disaster home loan availability and wealth creation through changes in home values after Hurricane Harvey. The study linked SBA data to seasonally adjusted private market housing data. The author used a fixed-effect difference-in-difference regression with propensity score matching study design to estimate the effect of federal credit recovery assistance on log median home values over time. Communities receiving federal credit assistance saw a statistically significant 6.4 % faster increase in home values than communities receiving no federal credit assistance post-Harvey. In addition, communities with shorter (two weeks or less) wait times to receive SBA loans saw a 2 % faster rise in home value prices post-Harvey than communities with longer median wait times. While disaster damage influenced the receipt of assistance, pre-disaster wealth influenced the speed of the assistance received. Understanding at what points barriers to access arise within the delivery of aid, and the wealth outcomes of such inequities, point to clear ways policy changes may promote equitable recovery for all.

Determinants of Wealth Outcomes in Female-Headed Households in Vietnam

This article uses data from the 2014 Vietnamese Household Living Standards Survey to compare the wealth outcome of Vietnamese female-headed households (FHH) to that of their male counterparts. The study takes an open position on the possible link between being a female head of the household and economic outcomes, focusing on heterogeneity among FHHs. The findings confirm that Vietnam has a small but significant group of married FHHs who have relatively high wealth, which makes the average wealth outcome of FHHs higher than that of male-headed households. The findings disagree with the view that these Vietnamese FHHs all have relatively privileged or advantageous economic conditions. In addition, the study confirms that land ownership, which is considered to play a key role in explaining the relatively strong wealth outcomes, is a distinguishing characteristic of married Vietnamese FHHs. HIGHLIGHTS Investigating the wealth outcomes of female-headed households (FHHs) in Vietnam reveals a heterogeneity of economic circumstances. FHHs are wealthier than male-headed households at upper quantiles of the household net worth. Not all Vietnamese female household heads who are married have high wealth. Wealth in FHHs is sensitive to household size, education, age, and wages. Land ownership plays a key role in explaining wealth outcomes of married FHHs.

Wealth accumulation and retirement preparedness in cross-national perspective: A gendered analysis of outcomes among single adults

Wealth is an increasingly important dimension of economic well-being and is attracting rising attention in discussions of social inequality. In this article, we compare – within and across countries – wealth outcomes, and link those to both employment-related factors and policy solutions that have the potential to improve wealth creation and retirement security for women. By constructing country-specific portraits of wealth outcomes and ‘retirement preparedness’, we reveal extensive cross-national variation in multiple facets of wealth. Our regression analysis finds a statistically significant and positive effect of work experience on wealth, with that effect, in general, increasing over time. The effect of work experience for single women is greater than for single men, suggesting that, among men, other, stronger forces are at work in creating wealth. The retirement preparedness outcomes indicate that single women in all three countries are in a precarious position at retirement, with much lower expected annual wealth levels than single men. The second preparedness indicator, which links expected annual wealth to income, demonstrates that men have the potential to cover larger shares of their income at retirement – and thus are more able, than their female counterparts, to maintain standards of living achieved earlier in life. Our policy discussion indicates that employment remains a viable option for ultimately bolstering women’s wealth accumulation. Many scholars, gender equality advocates and policymakers have argued for raising women’s employment rates – for a multitude of reasons – but few, if any, have made the case for strengthening women’s employment in order to ultimately bolster women’s wealth building. We hope to help reduce the gap in the literature on policy supports for women’s employment and re-open the discussion on how women can create more wealth.

Response to Célérier and Tak (April 2021)

Stein and Yannelis (2020) (SY) study the short-term impact of the Freedman’s Savings Bank on human capital, labor market, and wealth outcomes. This short note is a response to Celerier and Tak (2021) (CT), which offers comments on SY, claiming to “empirically reject the assumptions of the study’s identification strategy” and arguing that “financial inclusion can be detrimental to minorities.” We show their claims are driven by a serious data error and by omitting data, and that their empirical tests do not evaluate the identification assumption in SY. After using an alternative matching strategy which throws out four-fifths of matches, CT present estimates with very large standard errors. We show that these estimates cannot statistically reject large effects, including many of the point estimates in SY.

Australian women with good financial knowledge fare better in divorce

Divorce dissolves couple households, who likely specialised in household financial decision-making tasks, into singles who need to learn new skills. Financial decisions will be particularly challenging for those newly separated people that are lacking knowledge and confidence. Given the substantive literature supporting the lack of financial knowledge of women in comparison to men, women are likely to be more disadvantaged by this aspect of divorce. We employ the HILDA Survey and find support for the role of financial literacy in improving wealth outcomes in divorce, particularly for women. We find that the positive impact is significant over the long term. This research contributes to knowledge of the role of financial education in building resilience to endure financial shocks. JEL classification: D14; G53; G50; J12; J16

Reversing the Gains of the Civil Rights and Women’s Movements: How Housing Strain and Market Exclusion Led to Wealth Depletion During the Great Recession

Objective: We use feminist standpoint theory to investigate how the intersection of identity influenced wealth loss following the Great Recession among older single adults who benefitted from the social movements and legislative gains of the 1960s and 1970s. Looking back on more than a decade of recession and recovery, this study explores how intersections of race, class, and gender produced different wealth outcomes for the early baby boomer EBB cohort. Method: A sample of older baby boomers from the University of Michigan Health and Retirement Study was selected at two waves, 2004 and 2016. We used a generalized estimation equation with interaction effects to test changes in wealth over time for different race and gender groups. Results: Controlling for income and health, we found that both single Black and white women lost wealth at significantly higher rates than single white men. Poor health was associated with wealth shocks, or substantial wealth loss, for single white women, whereas the intersection of race and gender was associated with wealth loss for single Black women. Black women in this cohort ended the Great Recession with $85,000 less than their peers based on the overlapping identities of race and gender independent of health trouble. Conclusions: The policy history of women’s credit and lending access, as well as predatory targeting during the subprime lending crisis, contextualizes our findings. We discuss policy approaches to prevent future wealth erosion in households headed by Black women.

The Feasibility of the "Omega Kid" Study Protocol: A Double-Blind, Randomised, Placebo-Controlled Trial Investigating the Effect of Omega-3 Supplementation on Self-Regulation in Preschool-Aged Children.

Self-regulation, the regulation of behaviour in early childhood, impacts children’s success at school and is a predictor of health, wealth, and criminal outcomes in adulthood. Self-regulation may be optimised by dietary supplementation of omega-3 long-chain polyunsaturated fatty acids (n-3 LCPUFAs). The aim of the “Omega Kid” study is to investigate the feasibility of a protocol to investigate whether n-3 LCPUFA supplementation enhances self-regulation in preschool-aged children. The protocol assessed involved a double-blind, randomised, placebo-controlled trial of 12 weeks duration, with an intervention of 1.6 g of eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA) per day (0.3 g EPA and 1.3 g DHA) in a microencapsulated powder compared to placebo. Children (n = 78; 40 boys and 38 girls) aged 3–5 years old were recruited and randomly allocated to the treatment (n = 39) or placebo group (n = 39). The HS–Omega-3 Index® served as a manipulation check on the delivery of either active (n-3 LCPUFAs) or placebo powders. Fifty-eight children (76%) completed the intervention (28–30 per group). Compliance to the study protocol was high, with 92% of children providing a finger-prick blood sample at baseline and high reported-adherence to the study intervention (88%). Results indicate that the protocol is feasible and may be employed in an adequately powered clinical trial to test the hypothesis that n-3 LCPUFA supplementation will improve the self-regulation of preschool-aged children.

Wealth and preferences for redistribution: The effects of financial assets and home equity in 31 countries

How does wealth affect preferences for redistribution? In general, social scientists have largely neglected to study the social effects of wealth. This neglect was partially due to a dearth of data on household wealth and social outcomes, and also to greater scholarly interest in how wealth has been accumulated rather than the social effects of wealth. While we would expect household wealth to be an important component of attitudes toward inequality and social welfare policies, research in this area is scarce. In this study, the relationship between wealth and preferences for redistribution is examined in cross-national global and comparative perspective using data on 31 countries from the 2009 wave of the International Social Survey Programme (ISSP), the first wave of that study to include measures of wealth. The findings presented compare the effects of two types of wealth—financial assets and home equity—and demonstrate that there are differences in effects by asset type and by redistributive policy in question. Financial wealth is more closely associated with attitudes about income equality, while home equity is more closely associated with attitudes about unemployment benefits. Moreover, while the upper categories of financial wealth have the largest negative effects on support for income equality, it is the middle categories of home equity that are most strongly associated with opposition to unemployment benefits. Effects also differ by country, but not in patterns that theories of comparative welfare states nor political economy would adequately explain.

Housing Tenure Outcomes of Children and Owner Occupants: A Literature Review

This paper reviews relevant literature pertaining to three key themes that have emerged in the housing tenure debates, specifically renting versus buying. These three themes have been identified as the educational outcomes of children, well-being outcomes and wealth outcomes. These themes while important to the consumer, have far reaching implications in policy and social services, dictating a significant portion of a person’s quality of life. Through this literature review I take a thematic approach to examine the identified themes in detail, to understand their shortcomings, outcomes and come to a conclusion on the most beneficial form of housing tenure and recommendations for future research. While it was found in almost every examined case that home ownership is generally the best form of housing tenure when it comes to positive outcomes of the aforementioned themes. It was further concluded that these outcomes may be a mere correlation of examined variables and not an intrinsic cause of the beneficial outcomes. These findings support the need for future research into the causation of degrees of benefit from different forms of housing tenure and subsequent alteration to policy to reflect the trajectory toward the best outcomes of occupiers.

Financial risk-taking and trait emotional intelligence

PurposeThe purpose of this paper is to study the relationship between financial risk-taking and trait emotional intelligence (EI).Design/methodology/approachAn incentivized online survey was conducted to collect the data, including measurements for cognitive ability and socio-demographic characteristics.FindingsThere is a positive correlation between trait EI and financial risk-taking that is at least as large as that between risk-taking and measures of cognitive control (CRT). Trait EI is a key determinant of risk-taking. However, not all components of trait EI play an identical role. In fact, we observe positive effects of well-being, mainly driven by males and sociability. Self-control seems to matter only for males.Research implications/limitationsThis study suffers from the bias of self-reported answers, a common limitation of all survey studies.Practical implicationsThis evidence provides a noncognitive explanation for the typically observed heterogeneity of financial risk-taking, in addition to more established explanations linked to cognitive skills. Investor profiles should be also determined on their trait EI.Social implicationsGovernments should start programs meant to improve the level of trait EI to ameliorate individual wealth outcomes. Female investors participation in the financial markets might increase by fostering their sociability.Originality/valueThe relationship between trait EI and each of its components with financial risk-taking is vastly unexplored, while it is the first time that gender effects are discussed in that set up.

Financial Inclusion, Human Capital, and Wealth Accumulation: Evidence from the Freedman’s Savings Bank

Abstract This paper studies how access to financial services among a previously unbanked group affects human capital, labor market, and wealth outcomes. We use novel data from the Freedman’s Savings Bank—created following the American Civil War to serve free Blacks—employing an instrumental variables strategy exploiting the staggered rollout of bank branches. Families with accounts are more likely to have children in school, be literate, work, and have higher occupational income, business ownership, and real estate wealth. Placebo effects are not present using planned but unbuilt branches, or for Whites, suggesting significant positive effects of financial inclusion.

The long shadows of war in China: Battle shocks in early life and health/wealth accumulation

This paper investigates the long-term effects of the 2nd Sino-Japanese war (1937–1945) and the later Chinese Civil War (1946–1950) on health and wealth outcomes of 45+ elder individuals in China. We find that exposure to the battle shock significantly reduces later adult health outcome such as lung function. Moreover, the later wealth accumulation is also affected negatively. According to our conservative estimates, exposure to battle shock(s) would reduce the lung capability by approximately 5% compared to the population mean and the wealth level by approximately 21% compared to the non-shocked groups. Exploiting the exogenous imposition of wealth equality during the 1950–1978 communism experiment in China, we argue it is the health accumulation channel which inherited the negative battle shocks rather than the wealth accumulation channel. We investigate quantitatively which health-model ingredients can replicate the lifecycle health/wealth dynamics of such early life shocks.

The Varying Effects of Incarceration, Conviction, and Arrest on Wealth Outcomes among Young Adults

AbstractPrevious research indicates that incarceration leads to declines in rates of homeownership and net worth, especially among baby boomers, but questions remain as to how other types of criminal justice system contact affect wealth outcomes during the transition to adulthood. Using data from the 1997 National Longitudinal Survey of Youth, we investigate how arrests, convictions, and incarceration influence net worth, financial assets, and debt among young adults. We find that most contact with the criminal justice system limited the ability of young adults to accumulate wealth between the ages of 25 and 30, an especially important time for building life-cycle wealth. Arrests were associated with asset and debt declines of 52–53 percent, and incarceration led to net worth and asset declines of 34 and 76 percent, respectively. These direct effects were also bolstered by the indirect effects of these variables through their relationship with marriage and earnings, especially in the case of incarceration. This study draws attention to how criminal justice system contact affects early adult wealth, thereby setting the stage to influence a host of life course dynamics for individuals and their families.

The Intergenerational Impact of China's New Rural Pension Scheme

The Intergenerational Impact of China's New Rural Pension Scheme

Gender Issues in Income-Contingent Student Loans: Do Women Benefit?

Although tertiary study is strongly associated with positive wealth outcomes, for those on the margin student debt can be a deterrent, a source of financial stress, or an indicator of irresponsible bad financial behaviour. In Australia, recent debate regarding the income-contingent loan (ICL) student debt scheme has highlighted gender differences in the ability to repay the debt. Drawing on the Australian HILDA Survey data for 2002–14, this study examined the gender differences for student debt holders, pinpointing some of the gender differences in the student debt trajectory and transitions over the sample period. Findings do show that student debtors in general are slightly less satisfied with their financial situation than the general population and are more likely to be from a socio-economically advantaged background. Results indicate that women are not particularly disadvantaged under the ICL scheme regarding the issues examined.

Mexican Americans and wealth: economic status, family and place

ABSTRACT We examine the effect of economic, family, and metropolitan area characteristics on Mexican Americans’ wealth outcomes. We use data from the Mexican American Study Project, a data set that allows us to examine longitudinal and intergenerational change. We find that Mexican Americans have one main source of wealth – home equity. Moreover, length of marriage among parent respondents was key for their wealth accumulation, while education and income were important for wealth accumulation among their adult children. Additionally, we find that parents’ wealth has a limited impact on their children’s wealth. Our results suggest that Mexican Americans’ wealth outcomes are mainly attributed to their own economic efforts, rather than the resources passed down from their parents. We argue that Mexican Americans’ modest financial resources and limited intergenerational support stymies their wealth progress. These findings substantiate the challenges of building wealth from a low starting point in socioeconomic resources and structurally-disadvantaged labour market position. Since parental wealth can lift a family beyond its own achievements, Mexican Americans may not be able to achieve financial security in the same manner as do whites. These findings have important implications for the financial conditions of Mexican immigrants and their descendants.

Financial Inclusion, Human Capital, and Wealth Accumulation: Evidence from the Freedman’s Savings Bank

This paper studies how access to financial services among a previously unbanked group affects human capital, labor market, and wealth outcomes. We use novel data from the Freedman’s Savings Bank—created following the American Civil War to serve free Blacks—employing an instrumental variables strategy exploiting the staggered rollout of bank branches. Families with accounts are more likely to have children in school, be literate, work, and have higher occupational income, business ownership and real estate wealth. Placebo effects are not present using planned but unbuilt branches, or for Whites, suggesting significant positive effects of financial inclusion.

A Fair Comparison Framework: Risk and Reward in Private & Public Investments

How does an asset with a higher expected return but higher risk compare to an asset with a lower expected return but lower risk? A natural answer is to rank them based on their risk-adjusted returns. But what if the expected return and risk are not estimated reliably? This is the challenge of investing in private markets and comparing their performance with public markets. We offer a framework to fairly compare private and public investment performance. We present a methodology to reliably estimate the expected return and risk of private assets using the notion of a self-contained, self-financed portfolio. Our estimates are intuitive as they are based on terminal wealth outcomes (rather than a time-series analysis) resulting from investing in private markets. Using these estimates, we compare a variety of investments including PE funds, private debt, public equity and bond indices. Our comparison also accounts for the limits and cost of leverage, when applicable. We find that terminal wealth-based means and volatilities of private investment returns are significantly different from those computed using traditional time-series return observations. We show that the ranks of various investments based on levered returns (with interest, fees, expenses and manager alpha) can be potentially different from those based on unlevered returns. Importantly, levered returns in mezzanine investments are competitive with buyout investments and that investment in long public market Baa-corporate bonds are, when levered to match risk, competitive with private market investments.

The long-term development impacts of international migration remittances for sending households: evidence from Morocco

We integrate qualitative and quantitative methods to document the long-term impact of international migration remittances on household investment strategies, wealth outcomes, and equity of asset ownership among households in a Moroccan oasis valley. In the early 1960s, nearly 80,000 Moroccan men from the south-eastern oases left their families to work in French coal mines. Anthropological fieldwork shows that this migration event initiated decades-long streams of steady income in the forms of remittances and pension checks. Accompanying household-level empirical analysis shows that this afforded the migrant-sending households a foothold in the ‘new’ economy: Households invested in vocational training, secondary schooling, and business ownership at rates higher than their non-sending counterparts. Migration also hastened the transition of households out of the ‘old economy’ – land and livestock ownership declined for migrant-sending households, particularly those owning more land. We also document that the migration event was unusually open – work in the coal mines was open to virtually anyone – meaning that the recruits came from across the entire class- and economic spectrum. The combination of an unusually low entry cost and the resultant provision of a large and long flow of cash meant that overall, migration was an equalizing force in the economy.