òòò½Íø Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Root Causes of the Racial Wealth Gap: A Critique of the Fed View
òòò½Íø Papers and Proceedings
vol. 115,
May 2025
(pp. 462–65)
Abstract
We address the Federal Reserve's model for Black–White wealth inequality. The Fed view has it that the Black–White wealth gap, when measured with an "expanded wealth concept," is smaller than previously thought and primarily explained by income differences shaped by personal decisions around human capital acquisition and family structure. We argue that the expanded wealth concept inappropriately treats future income flows from Social Security and defined benefit pensions as an asset. Even using this measure, the absolute Black–White wealth gap increases with the adjustment. We present results using the PSID that demonstrate that parental wealth better captures transmission of intergenerational (dis)advantage.Citation
Darity Jr., William A., and Stephan Lefebvre. 2025. "Root Causes of the Racial Wealth Gap: A Critique of the Fed View." òòò½Íø Papers and Proceedings 115: 462–65. DOI: 10.1257/pandp.20251119Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- E58 Central Banks and Their Policies
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination