Wealth Inequality in Black and White: Cultural and Structural Sources of the Racial Wealth Gap

Abstract

Using data from the 2013 Survey of Consumer Finances, this research examines competing and complementary cultural and structural explanations of the sources of racial differences in wealth. We use OLS regression and quantile regression to identify the major individual-level sources of wealth differences between African Americans and whites. Whites have more favorable wealth characteristics than do African Americans on all of the variables in the analysis: gender of household head, bankruptcies, spending patterns, stock ownership, business ownership, home ownership, inheritance, educational attainment, income, occupation, age, and number of children. Cultural factors, having a female-headed family, spending patterns, and inheritance account for little of the racial wealth gap. Racial differences in income, stock ownership, and business ownership account for much of the explained racial wealth gap. Moreover, compared with whites, African Americans receive significantly lower wealth returns to education, age, income, stock ownership, and business ownership. We discuss the implications of our findings.

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Acknowledgments

We would like to thank William “Sandy” Darity, Hayward Derrick Horton, Lori L. Martin, Melvin Oliver, Moshe Semyonov, Thomas Shapiro, and Melvin Thomas for their comments and suggestions on various drafts. We would also like to thank the anonymous reviewers at Race and Social Problems who made constructive suggestions that strengthened the paper. Finally, we are grateful to those who provided comments at a colloquium at the University of Illinois at Urbana-Champaign. Parts of this paper have been presented at the American Sociological Association Conference, the Association of Black Sociologists Conference, and a United Nations Conference on Poverty, Inequality, and Global Conflict.

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Correspondence to Cedric Herring.

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Herring, C., Henderson, L. Wealth Inequality in Black and White: Cultural and Structural Sources of the Racial Wealth Gap. Race Soc Probl 8, 4–17 (2016). https://doi.org/10.1007/s12552-016-9159-8

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Keywords

  • Racial inequality
  • Wealth inequality
  • Racial wealth gap
  • Net worth and race