Quantifying Specific and Systemic Factors in the Black-White Wealth Gap in the United States

Abstract

This paper provides a new quantification of the role of specific and systemic factors in racial wealth disparities in the United States. Specific or individual factors include characteristics such as education, occupation, homeownership and inheritance. Systemic factors can be captured by considering the effect of differences in characteristics when taken together. Utilizing the 2016 Survey of Consumer Finances and various empirical strategies for decomposing the contributors to wealth differences, we show that much of the Black-White wealth gap in the US is associated with unmeasured structural or systemic factors, rather than measured individual characteristics. While a combination of inheritance, education, and occupation may account for a part of differences in wealth levels across races, none of them alone could provide a pathway to reduce or eliminate the disparities. We also use quantile regressions to reinforce the view that the racial wealth gap exists
within slices of the wealth distribution, and is not only due to possible class effects.

Keywords: wealth inequality, racial inequality, education, inheritance, wealth patterns

JEL Classification: D31, D63, G51, J15, Z13