Overcoming Compound Racial Inequity
Dec 7, 2022
This report presents several iterations of a stylized model of wealth accumulation that reflect historical patterns in income and wealth shown in prior research. This presentation provides the necessary context to understand the wealth differences among all Americans and those factors, in particular, that contribute to Black-white wealth differences.
A Stylized Model of Wealth Accumulation
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Research has consistently found that income and wealth are not remade every generation but rather are closely linked to the income and wealth of past generations. This context is necessary to understand the current wealth differences between Black and white Americans. The difference in typical, or median, wealth between Black and white households has increased greatly since 1968.
Certain factors, or determinants, have been demonstrated through research to greatly influence income or wealth. This report, part of a discussion paper series investigating the U.S. racial wealth gap, presents several iterations of a stylized model of wealth accumulation that reflect historical patterns in income and wealth shown in prior research. The aim is not to change how wealth disparities and wealth accumulation are researched but to change how they are presented and perceived.
This report describes both broad determinants of wealth differences that apply to all individuals, regardless of race, and those factors, in particular, that contribute to Black-white wealth differences, such as inherited advantage, or how the path of wealth accumulation varies based on parental income and wealth; labor, credit, and housing market discrimination; other shocks and barriers; and different bequests.
Although far from exhaustive, the model conveys not only the large gaps in Black and white wealth but also illustrates how these gaps could worsen over time.
Funding for this research was provided by gifts from RAND supporters and income from operations. The research was conducted by RAND Education and Labor.
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