Exploring Intergenerational Wealth Transfer Dynamics with Agent-Based Models

Personal wealth is often viewed as a product of good decision-making. Choose a good education, a good job, earn a good income, invest wisely, take risks, start a business, innovate. However, the reality of wealth is quite different. Wealth is often passed down from generations through inheritance and in-vivo transfers. One's household's wealth is as much an expression of their opportunities, as it is the opportunities of their parents and their grandparents. This means that wealth is a way for the present to hang on to the past and to propel the future. For differences between Black and white households, wealth is a reflection of past inequity.

Longstanding inequities in the U.S. have worked against racial equity through myriad legal practices & exclusions: slavery, Jim Crow, the New Deal, FHA loans, the GI Bill's lack of Black inclusion, the de jure segregation of red lining, reverse red lining, racial covenants, and the persistent injustices of a criminal justice system that led to the death of George Floyd sparking a wave of protest and conversation (Rothstein 2017, Darity Jr and Mullen 2020). While no American alive bore firsthand witness to all of this history, most Americans have borne witness to some, and the accumulation of harms reverberates across the life course of all. The sociological, psychological and ethical costs of disparities and discrimination in access to education, health, jobs, housing, justice, and financing cannot be fully measured. There is however one indicator that reflects some portion of these inequitable costs: the Black-white wealth gap in American society today (Shapiro, Meschede et al. 2013, Fox 2016, Pfeffer 2018, Boshara 2020, Aladangady and Forde 2021, Toney and Robertson 2021). The wealth gap reflects income differences accumulated over time, and hence serve as a useful economic "stock" of disparities. While median white household income is $68,000 and $40,000 for Blacks, the total wealth of an average white family is 10 times that of a Black family -- $170,000 v $17,000 (Federal Reserve Board 2019).

This paper is motived by addressing the history of unjust and, at times, racially motivated policy-making that is responsible for significant portions of the adverse racially disparate outcomes we can now measure. Given a long term policy challenge of identifying effective policies for addressing the wealth gap, this paper takes a first step in introducing a modeling environment that could be used for testing the long run impacts of policy interventions on differences between white and Black wealth.