11 June 2010

Black-White Wealth Gap Remains

In 1984, the median white family had a net worth (excluding home equity) of a little over $20,000. As of 2007, it was closer to $100,000. But, for the entire time period, the median black family has had a net worth over under $5,000, remaining essentially flat.

The non-home equity wealth of the highest income third of African-American families has actually fallen from 1984 levels to $18,000 in 2007. White in the middle third of the income distribution have seen their wealth increase to $74,000 in 2007, and the wealth of white families in the top third of the income distribution has increased even more, to about $240,000.

About 40% of African-American families have no net worth or negative net worth. Less than 10% of white families have no net worth or negative net worth (the 10th percentile net worth was $100 for white families).

The wealth gap by race is large even controlling for income.


Dave Barnes said...

We have data.
Do we have a hypothesis?

Michael Malak said...

Why, having a hypothesis in the post would just invite counterarguments that Andrew would have to spend time on.

So, I'll take a stab at hypotheses.

According to African-American Wealth: Levels, Composition, Gaps, and Comparisons, some of the reasons include lack of inheritance and lower marriage rate (easier for stable married families to accumulate wealth).

To that, I will add higher time preference by African-Americans, as confirmed by this study. Lower time preference means less savings. But why the higher time preference? I'll leave that for others to hypothesize.

Dave Barnes said...

$34 fucking dollars for David Bishai's article?!
I think that is absurd.
Springer-Verlag are douchebags.
I am sure that his ideas are well worth considering, but $34. Get off.

Michael Malak said...

I just read the abstract for free.