Wealth Trajectories Research Articles

The spatial polarization of housing wealth accumulation across Spain

Housing wealth is central to structuring inequalities across societies. Processes of financialization have intensified the speculative nature of housing, while labour and welfare restructuring increase the importance of property wealth towards economic security. Housing, however, represents an exceptional asset given its inherently spatial nature and buy-in barriers. This implies that not only access to homeownership but where households enter the housing market is central to wealth trajectories. Spatial inequality in housing trends thus fundamentally structures wealth dynamics. While some scholarship has posited increasing housing market spatial polarization, there remains a lack of empirical evidence. This research turns to the context of Spain, to directly assess spatial polarization in housing value accumulation. Employing an innovative dataset at a detailed geographic scale, the analyses reveal strong increases in polarization across the national territory over the past decade. Strikingly, these dynamics appear resistant to major upheavals, including the post-GFC crash and Covid-19 impacts, and are robust across scales. The analyses reveal that more expensive areas saw greater absolute gains and higher rates of appreciation. The findings expose a structural intensification of spatial polarization and provide crucial empirical evidence of how the housing market acts in amplifying inequality through the spatial sorting of wealth accumulation.

Cognition and Wealth Changes in Mid-to-later Life: A Latent Class Trajectories Approach Using the Health and Retirement Study.

ObjectivesTo assess how cognitive trajectories from mid-to-later life relate to wealth change, overall and by mid-life income. Methods: Data were from participants (51-64years) in the 2000-2018 U.S. Health and Retirement Study who were cognitively healthy at baseline (year 2000; unweighted n = 3821). Longitudinal latent class analyses generated cognitive and wealth trajectories, independently, and multinomial logistic regressions estimated the association between cognitive trajectories and wealth profiles, overall and by median income. Results: We identified three cognitive: cognitively healthy (CH), increasing cognitive impairment (ICI), and increasing dementia (ID) and four wealth profiles: stable wealth loss (SWL), delayed gradual wealth loss (DGWL), stable wealth gain (SWG), and gradual wealth gain (GWG). The ID group had higher probability of being in the SWL group and lower probability of SWG, which was more pronounced in respondents with greater median income. Discussion: Individuals with ID may be vulnerable to wealth loss, particularly for middle-class households.

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.

Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness

<ns3:p>Borrowing for education has increased rapidly in the past several decades, such that the majority of non-housing debt on US households' balance sheets is now student loan debt. This chapter analyzes the implications of student loan borrowing for later-life economic well-being, with a focus on retirement preparation. We demonstrate that families holding student loan debt later in life have less savings than their similarly educated peers without such debt. However, these comparisons are misleading if the goal is to characterize the experience of the typical student borrower, as they fail to account for student borrowers who already paid off their debt. We develop strategies to locate families that ever financed their education with student loans in two large datasets which enables us to draw more meaningful comparisons. We find that student loan borrowers roughly follow the earnings, saving, and wealth trajectories of other college-educated families into late-career ages and are much better off financially than those that did not attend college.</ns3:p>

Time cannot heal all wounds: Wealth trajectories of divorcees and the married.

ObjectiveTo explore disparities in wealth trajectories between divorcees and continuously married individuals including moderation effects of remarriage and gender.BackgroundAmid concerns of long‐term economic consequences of divorce, research illustrated that ever‐divorced individuals hold less wealth than the married preretirement. However, it remains unclear whether this is a direct result of immediate, lasting divorce‐related wealth penalties or whether divorce also leads to long‐term wealth accumulation disparities.MethodUsing personal‐level, longitudinal wealth data from the Socio‐Economic Panel Study, I applied propensity score and exact matching with random‐effects growth models to compare wealth trajectories of divorcees and the married. The matching allowed (1) married controls to be assigned a theoretical divorce date for ease of comparability to the treatment group (i.e., divorcees) and (2) the account of a wide range of baseline differences.ResultsWealth differences between ever‐divorce and continuously married individuals stem from lasting disadvantage—particularly for housing wealth—generated immediately around divorce rather than a scarring of divorcees' wealth accumulation. Remarriage but particularly gender is relevant moderators. Whereas remarriage moderates net wealth trajectories through housing wealth, gender moderates trajectories through financial wealth.ConclusionDivorce importantly contributes to wealth stratification. Mitigation of divorce‐related wealth penalties for both men and women needs to focus on immediate, but lasting costs of divorce particularly regarding homeownership.

Wealth accumulation by hypogamy in own and parental education in China

AbstractObjectiveThis study examines how household wealth accumulation varies by different types of hypogamy on the basis of couples' own and parental education.BackgroundEducational hypogamy (wives having more education than their husbands) is increasingly relevant in many societies, given the reversal of the gender gap in education. Prior research has studied how marital sorting on couples' own education shapes their individual earnings trajectories. Few have examined the implications of marital sorting on parental education for family‐level economic well‐being.MethodUsing data from the 2010–2018 China Family Panel Studies and multilevel growth curve models, this study examined how household wealth trajectories over years of marriage differ by types of hypogamy. Hypogamy in the child generation (wives having more education), hypogamy in the parent generation (wives having more parental education), and hypogamy in both generations (wives having more own and parental education) were compared to hypogamy in neither generation (wives having neither more own nor parental education).ResultsHypogamy in either the child or the parent generation accumulated more total wealth and housing wealth than hypogamy in neither generation. Hypogamy in both generations experienced the fastest gains in total wealth.ConclusionHypogamy on the basis of couples' own or parental education is associated with more household wealth and faster wealth accumulation over years of marriage.ImplicationsThis study sheds light on the long‐term implications of hypogamy based on the education of two generations for wealth stratification.

PATTERNS OF WEALTH TRAJECTORY IN LATER LIFE: CRITICAL PERIOD, ACCUMULATION, AND SOCIAL MOBILITY MODELS

Wealth, an important financial cushion for older adults to buffer economic stress, requires a longer time to accumulate and develop in one’s course of life. However, little is known about the trajectories of wealth in later life, and how the life course socioeconomic status (SES) may contribute to the development of wealth at old-age. This study investigated longitudinal patterns of wealth trajectory and whether SES across the life course affects these trajectories using critical period, accumulation, and social mobility models. Using data from 16,189 adults aged 51 and older from the 2004-2014 Health and Retirement Study, a growth mixture model was used to explore distinct wealth trajectories. Impacts of life course models were studied using multinomial logistic regression. Results showed that four heterogeneous latent classes of wealth were identified: Stable high (reference group), Low and increasing, Stable low, and High but decline. Disadvantaged adulthood SES, accumulated exposure to socioeconomic risks, and downward or persistent socioeconomic disadvantage over the life course were associated with Stable low, Low and increasing, and High but decline, supporting all three life course mechanisms on wealth development in later life. Evidence suggests that wealth development is heterogeneous across individuals, and a strong gradient effect of life-course SES on wealth trajectories are clearly observed. Programs and policies should address the effects of life course on wealth development to strengthen the economic well-being in later life.

WEALTH PROFILES AND VARIATIONS BY GENDER AND RACE: A GROWTH-MIXTURE MULTIGROUP COMPARISON

Wealth is fundamentally affected by various life course characteristics. However, little is known about the role of life course factors in shaping wealth trajectories in later life. This study explored how the longitudinal profiles of wealth varied by gender and race (white and non-white populations). Data came from the 2004-2014 Health and Retirement Study with 16,189 older adults aged 51 and older. With corrections for clustered effect within household, this study used growth mixture modeling (GMM) to identify the longitudinal patterns of wealth, and how these profiles varied by these two important life course attributes. The model began with a separate GMM model for race and gender to investigate the optimal latent class model. These results were combined using multi-group approach to incrementally examine the gender and race invariance using configural (same form), structural (same trajectory mean), dispersion (same trajectory variance), and distributional (same latent class size) test. Results identified four distinct wealth profiles—Stable high, Low and increasing, Stable low, and High but decline—for each race and gender category. The multigroup GMM analyses revealed that the wealth profiles varied by gender and race, but the degrees of variation differed a great deal, with results supporting a dispersion model for gender but a configural model for race. Results indicate that race has a stronger effect in shaping wealth development compared to gender. The findings suggest that understanding wealth disparities in later life could be facilitated by examining how wealth varies by gender and race.

Suboptimal investment behavior and welfare costs: A simulation based approach

We propose a representation of suboptimal investment behavior based on the stochastic discount factor (SDF) paradigm. Suboptimal investment behavior is rationalized as being the investor’s optimal decision under a wrong SDF, while wealth trajectories and budget constraints are based on the true SDF. We develop a novel Monte Carlo simulation approach to compute the welfare costs for this suboptimal behavior.We study the suboptimal portfolio choice under CRRA preferences using two financial market models. The Monte Carlo simulation delivers comparable welfare losses to those computed in the original studies, which are based on partial differential equations (PDE) and - finite-difference schemes.

The contribution of dementia to the disparity in family wealth between black and non-black Americans

AbstractThe enormous economic burden of dementia in the United States of America falls disproportionately on families coping with this devastating disease. Black Americans, who are at greater risk of developing dementia than white Americans, hold on average less than one-eighth of the wealth of white Americans. This study explores whether dementia exacerbates this wealth disparity by examining dementia's effect on wealth trajectories of black versus non-black Americans over an eight-year period preceding death, using five waves of data (beginning in 2002 or 2004) on decedents in the 2012 and 2014 waves of the Health and Retirement Study (N = 2,429). Dementia is associated with a loss of 97 per cent of wealth among black Americans, compared with 42 per cent among non-black Americans, while wealth loss among black and non-black Americans without dementia did not differ substantially (15% versus 19%). Dementia appears to increase the probability of wealth exhaustion among both black and non-black Americans, although the estimate is no longer significant after adjusting for all covariates (for blacks, odds ratio (OR) = 2.04, 95% confidence interval (CI) = 0.83, 5.00; for non-blacks, OR = 1.47, 95% CI = 0.95, 2.27). Dementia has a negative association with home-ownership, and the loss or sale of a home may play a mediating role in the exhaustion of wealth among black Americans with dementia.

A quasi-experimental study of impacts of Tanzania\u2019s wildlife management areas on rural livelihoods and wealth

Since the 2000s, Tanzania’s natural resource management policy has emphasised Wildlife Management Areas (WMAs), designed to promote wildlife and biodiversity conservation, poverty alleviation and rural development. We carried out a quasi-experimental impact evaluation of social impacts of WMAs, collecting data from 24 villages participating in 6 different WMAs across two geographical regions, and 18 statistically matched control villages. Across these 42 villages, we collected participatory wealth ranking data for 13,578 households. Using this as our sampling frame, we conducted questionnaire surveys with a stratified sample of 1,924 household heads and 945 household heads’ wives. All data were collected in 2014/15, with a subset of questions devoted to respondents’ recall on conditions that existed in 2007, when first WMAs became operational. Questions addressed household demographics, land and livestock assets, resource use, income-generating activities and portfolios, participation in natural resource management decision-making, benefits and costs of conservation. Datasets permit research on livelihood and wealth trajectories, and social impacts, costs and benefits of conservation interventions in the context of community-based natural resource management.

Inherited Prospects: The Importance of Financial Transfers for White and Black College‐Educated Households’ Wealth Trajectories

AbstractThe persistent racial wealth gap in the United States continues to grow, reaching an all‐time high in 2016. Throughout much of the discussion and analysis on the racial wealth gap, however, the assumption that higher education can at least narrow the gap has often been left unquestioned. While education is a factor in increasing incomes and wealth, recent research challenges the narrative that education is the key to reducing the racial wealth gap. Our findings provide further support for this growing literature. While black college graduates do have higher wealth than those without college degrees, the wealth gap with white college graduates remains vast, and the inheritances received by white college‐educated households provide a huge boost to wealth that is not available to their black counterparts. Further, we find that black college‐educated households are much more likely to provide financial support for their parents as well as their children, and that black households that do provide support across generations do so with much less net wealth than white households that do not.

Comparing Retirement Wealth Trajectories on Both Sides of the Pond

AbstractWe use comparable data from the US and England to examine similarities and differences in the level and trajectories of assets among households aged 70 and over. We find that in the US assets on average decline gradually with age, while in England older households actually accumulate wealth. These differences appear to be driven largely, though not entirely, by housing wealth: over the period we consider, house price growth drove increases in housing wealth in England that more than offset the slow drawdown of non‐housing wealth. This suggests the illiquid nature of housing is likely to be an important factor in explaining wealth drawdown at older ages. We also consider the potential importance of bequest motives and savings to insure against the risk of medical and long‐term care expenses.

Diverging Fortunes: Racial/Ethnic Inequality in Wealth Trajectories in Middle and Late Life

The primary aim of this study is to examine whether racial/ethnic inequality in wealth dissipates or increases between middle and late life, and by how much. To address this aim, this study draws on critical race and life course perspectives as well as 10 waves of panel data from the Health and Retirement Study and growth curve models to understand racial/ethnic inequality in wealth trajectories among whites, blacks, and Mexican Americans (N = 8337). Findings show that, by midlife, significant inequalities in net worth emerge between whites and their black and Mexican American counterparts. On average, white households have amassed a net worth of $105k by midlife, compared to less than $5k and $39k among black and Mexican American families, respectively. Moreover, whites experience much more rapid rates of wealth accumulation during their 50s and 60s than their minority counterparts, resulting in increasing wealth disparities with age, consistent with a process of cumulative disadvantage. At the peak of their wealth trajectory (at age 66), whites have approximately $245k more than blacks and $219k more than Mexican Americans. A wide range of socioeconomic, behavioral, and health factors account for a portion, but not all, of racial/ethnic inequality in wealth, suggesting that unobserved factors such as parental wealth, segregation, and discrimination may play a role in the production and maintenance of wealth inequality.

Climate vulnerability as a relational concept

Within the rapidly expanding literature on the human dimensions of climate change, the ways in which the term vulnerability is used have proliferated. With the increasing influence of the concepts of adaptation and social resilience, there has been the tendency to treat vulnerability as a characteristic of individuals or social groups. In this respect, various quantitative measures of poverty are used as indicators of vulnerability. These approaches run counter to approaches that embrace context and most importantly the social relations that shape the multidimensionality of vulnerability. This paper engages these different viewpoints by juxtaposing the wealth trajectories of the members of 54 households in western Niger from 1984–1994 with an understanding of the changing social relations among these individuals gained from surveys and open-ended interviews of household members. Data analysis shows that poverty alone is an incomplete measure of an individual or household’s vulnerability to loss due not only to the randomness of biophysical hazard but also to different obligations and entitlements attached to wealth. Shifts in wealth following the historic drought of 1984, were more related to longer-term changes in social relations tied to recurrent drought during and before the study period than to the 1984 “trigger” itself. Women and junior men gained wealth relative to senior men. The gains in wealth among women do not reflect their lower vulnerability compared to senior men but rather, their reactions to address their vulnerable positions. In this way, measures of poverty, uninformed by an understanding the changing qualitative nature of social relations, are poor measures of vulnerability in the Sahelian region.

Comparing Retirement Wealth Trajectories on Both Sides of the Pond

We use comparable data from the US and England to examine similarities and differences in the level and trajectories of assets among households aged 70 and over. We find that in the US assets on average decline gradually with age, while in England older households actually accumulate wealth. These differences appear to be driven largely, though not entirely, by housing wealth: over the period we consider house price growth drove increases in housing wealth in England that more than offset the slow draw down of non-housing wealth. This suggests the illiquid nature of housing is likely to be an important factor in explaining wealth drawdown at older ages. We also consider the potential importance of bequest motives and savings to insure against the risk of medical and long-term care expenses.

Nonmarital Fertility, Union History, and Women's Wealth.

We use more than 20 years of data from the National Longitudinal Survey of Youth 1979 to examine wealth trajectories among mothers following a nonmarital first birth. We compare wealth according to union type and union stability, and we distinguish partners by biological parentage of the firstborn child. Net of controls for education, race/ethnicity, and family background, single mothers who enter into stable marriages with either a biological father or stepfather experience significant wealth advantages over time (more than $2,500 per year) relative to those who marry and divorce, cohabit, or remain unpartnered. Sensitivity analyses adjusting for unequal selection into marriage support these findings and demonstrate that race (but not ethnicity) and age at first birth structure mothers' access to later marriage. We conclude that not all single mothers have equal access to marriage; however, marriage, union stability, and paternity have distinct roles for wealth accumulation following a nonmarital birth.

The Absorbing Status of Incarceration and its Relationship with Wealth Accumulation

This study extends our knowledge on the negative effects of incarceration to the accumulation of wealth by examining whether, how, and how much incarceration affects home ownership and net worth. It also investigates how these outcomes vary with the time since a person was incarcerated and the number of incarceration periods, along with addressing potential mechanisms behind this relationship. I apply hybrid mixed effects models that disaggregate within- and between person variation to investigate incarceration’s relationship with home ownership and net worth, using National Longitudinal Study of Youth data from 1985 to 2008. I also incorporate a set of mediation models in order to test for indirect effects of incarceration on wealth through earnings, health, and family formation. My results show that incarceration limits wealth accumulation. Compared to never-incarcerated persons, ex-offenders are less likely to own their homes by an average of 5 percentage points, and their probability of home ownership decreases by an additional 28 percentage points after incarceration. Ex-offenders’ net worth also decreases by an average of $42,000 in the years after incarceration. When combined with previous research on incarceration, my findings show that incarceration acts as an absorbing status, potentially leading to the accumulation of disadvantage. Although incarceration’s negative effects on wealth accumulation were partially mediated by its relationship with earnings and family formation, incarceration directly affected home ownership and net worth. In most cases, former inmates began with flatter wealth trajectories and experienced additional losses after incarceration.

Can the Risk of Medical Expenditure Explainthe Wealth Trajectories of Elderly Singles?

In this article, I analyze the role of precautionary savings as a determinant of the wealth holdings of elderly singles. The novel aspect of the analysis is that the distribution of medical expenditure is allowed to be individual-specific, and the variance of medical expenditure is estimated for each individual using repeated observations on medical expenditure. To address the measurement error problem in medical expenditure, I use an instrumental variable estimator. I construct a simple life-cycle model and show that the coefficient of relative risk aversion can be identified from a log-linearized Euler equation for wealth, using the variation in the risk of medical expenditure. The results imply that precautionary savings can account for up to 56% of the wealth holdings of elderly singles. This means lowering the risk exposure of medical expenses at older ages could significantly alter the retirement asset draw-down rates and strategies.

The Intersection and Accumulation of Racial and Gender Inequality: Black Women's Wealth Trajectories

Prior research has found evidence of large racial and gender disparities in wealth, with blacks possessing less wealth than whites and women having less wealth than men. An intersectionality approach suggests that the overlapping impacts of racial and gender domination are likely to combine in a multiplicative fashion that places black women in a uniquely precarious economic position. However, little is known about the wealth holdings of black women and even less is known about whether their wealth increases, decreases or remains stable as they approach retirement age, a stage of life when savings are especially important. This study utilizes seven waves of panel data from the Health and Retirement Study (HRS) and growth curve models to estimate the wealth trajectories of black women between the ages of 51 and 73. Results reveal that black women have especially low levels of net worth and net financial assets during middle and late life, suggesting high risk of economic insecurity in later life. Consistent with political economy and intersectionality perspectives, their persistently low wealth trajectories are likely the result of state policies, discrimination, residential segregation and health disparities. Ameliorative policy prescriptions are discussed.