nach oben

Demography

Erschienen in:

01.06.2014

Do Racial Disparities in Private Transfers Help Explain the Racial Wealth Gap? New Evidence From Longitudinal Data

verfasst von: Signe-Mary McKernan, Caroline Ratcliffe, Margaret Simms, Sisi Zhang

Erschienen in: Demography | Ausgabe 3/2014

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

How do private transfers differ by race and ethnicity, and do such differences explain the racial and ethnic disparity in wealth? Using the Panel Study of Income Dynamics, this study examines private transfers by race and ethnicity in the United States and explores a causal relationship between private transfers and wealth. Panel data and a family-level fixed-effect model are used to control for the endogeneity of private transfers. Private transfers in the form of financial support received and given from extended families and friends, as well as large gifts and inheritances, are examined. We find that African Americans and Hispanics (both immigrant and nonimmigrant) receive less in both types of private transfers than whites. Large gifts and inheritances, but not net financial support received, are related to wealth increases for African American and white families. Overall, we estimate that the African American shortfall in large gifts and inheritances accounts for 12 % of the white-black racial wealth gap.

Vorheriger Artikel The Effect of Anti-Abortion Legislation on Nineteenth Century Fertility

Nächster Artikel Selection, Language Heritage, and the Earnings Trajectories of Black Immigrants in the United States

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

We define private transfers as (1) financial (e.g., cash, checks) support given and received and (2) large gifts or inheritances received. These transfers may be inter vivos (made during the giver’s lifetime) or inherited (takes effect upon the giver’s death). Both transfer types can be intergenerational (between different generations) or intragenerational (within a generation). Data used for this analysis capture interhousehold transfers (between households), not intrahousehold transfers (within a household), although our models control for family coresidence.

For example, Cox (1987) used the President’s Commission on Pension Policy survey from 1979, Wilhelm (2001) used the 1989 wave of the PSID, Avery and Rendall (1997) used the 1989 SCF, and Menchik and Jianakoplos (1997) used the 1989 SCF and 1976 wave of the National Longitudinal Survey of Mature Men.

For instance, a person gives money to his unemployed relative (or friend) as insurance for receiving similar help in the future when he faces a financial emergency.

There are fixed costs associated with the purchase of a home, so the benefits of the home purchase would be observed over time.

The PSID added 441 immigrant families in 1997 and 70 families in 1999.

Prior to 1999, wealth information was collected in 1984, 1989, and 1994.

Our analysis by race and ethnicity is based on the race and ethnicity of the head of the household; interracial marriage is relatively rare in the PSID sample.

We have information only on number of parents living as reported in 2007, so this variable is not time-varying in our empirical models.

When the PSID shifted to biennial interviewing, it began collecting many, but not all, data items for each of the two prior years. Although income support received from two years ago is collected, income support given is collected only from the past year, not two years ago. Thus, we are not able to construct a measure of net support received two years ago.

Our measure does not include loans or charitable contributions to organizations.

The PSID does not provide information that allows us to separate transfers given by the family head and spouse/partner from those given by other family members.

Whether omitting loans that convert to gifts results in an underestimate or overestimate can be understood in an omitted variable bias framework. If people who receive loans that convert to gifts are less likely to receive a large gift or inheritance, then we underestimate the relationship between large gifts/inheritances and wealth. If, on the other hand, people who receive loans that convert to gifts are more likely to receive a large gift or inheritance, then we overstate the relationship. If the two are uncorrelated, bias is not an issue.

These differences in wealth stem from lower asset holdings for minorities, not from higher debt.

The wealth differences by race and ethnicity remain large and statistically significant when measured with means instead of medians. For example, mean wealth for black non-Hispanics, Hispanics, and white non-Hispanics was $75,571, $129,686, and $311,214, respectively, during the 1999–2007 period.

Recall that although transfer income received at t – 2 is collected, transfer income given at t – 2 is not collected.

The dependent variable is set to zero for the 5.5 % of families that have zero wealth and the 11.4 % of families that have negative wealth because the natural log is not defined for zero or negative values. The model produces similar results if we drop these observations instead of setting them to zero. To further understand the implications of how we treat these negative and zero wealth values, we estimated three additional sets of models using wealth (vs. the natural log of wealth) as the dependent variable. The three model scenarios are (1) models estimated on the full sample (all negative and zero wealth values are included), (2) models estimated on the full sample, but negative wealth values are replaced with zeros, and (3) all observations with zero or negative wealth dropped. The estimated effect of large gifts and inheritances on wealth is nearly identical across the three models (overall and by race), suggesting that how negative and zero wealth values are treated does not affect the results.

We test whether our results are sensitive to using a measure of permanent family income (average income from 1998 to 2006) rather than family income last year. They are not.

Given the potentially important role of immigrant status in private transfer differences, we examine differences in private transfers by immigrant status, as well as race and ethnicity, in our upcoming regression results.

The “support received” coefficients less the “support given” coefficients do not equal the net “support received” coefficients exactly because net transfers received are estimated using WLS regression, whereas support received and given are estimated using Tobit regressions. The estimated coefficients do sum exactly when WLS is used for all three regressions, in part because the black “support given” coefficient becomes positive and insignificant.

We include home equity in our wealth definition because of the important role that private transfers can play in down payments. Excluding home equity from wealth cuts our estimate of the contribution of racial differences in private transfers to the wealth gap in half, from 12 % to 6 %.

We calculate the dollar change in wealth as (exp(0.004) – 1) × 83,360, where 83,360 is the weighted median of wealth.

This lack of relationship between financial support and wealth continues to hold when support received and support given enter this specification individually, rather than as net support received (p = .30 and p = .40, respectively; not shown).

This finding is based on estimates of Eq. (5), where the weighted average of log wealth is 10.4 for white non-Hispanics and 7.2 for black non-Hispanics. The weighted averages of large gifts and inheritances accumulated between 1997 and 2007 are $21,320 for white non-Hispanics and $2,914 for black non-Hispanics. Because large gifts and inheritances are a rare event, we use their accumulated value over the past 10 years (between 1997 and 2007) to measure their cumulative effect on the racial wealth gap.

Important caveats are that the PSID does not capture gifts or inheritances of less than $10,000, nor does it capture loans from family or friends that are never repaid (which, in essence, convert to gifts). As a result, we are unable to measure differences in smaller gifts/inheritances or unpaid loans by race/ethnicity or their role in the racial wealth gap.

The likelihood of receiving a large gift or inheritance did not change over the study period, although the dollar amount increased for white non-Hispanic families. The average real dollar value of large gifts and inheritances increased from $66,000 for white non-Hispanic families (conditional on receiving) in 1999 and 2001 to $83,000 in 2005 and 2007. Black non-Hispanic and Hispanic families saw no statistically significant increase.

Provisions in the American Taxpayer Relief Act of 2012 exempt estates less than $5.25 million, an amount that will be inflation-adjusted over time.

Altonji, J. G., Hayashi, F., & Kotlikoff, L. J. (1997). Parental altruism and inter vivos transfers: Theory and evidence. Journal of Political Economy, 105, 1121–1166.CrossRef

Avery, R. B., & Rendall, M. S. (1997). The contribution of inheritances to black-white disparities in the United States (Bronfenbrenner Life Course Center Working Paper 97-08). Ithaca, NY: Cornell University.

Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82, 1095–1117.CrossRef

Becker, G. S. (1974). A theory of social interactions. Journal of Political Economy, 82, 1063–1093.CrossRef

Bernheim, D. B., Shleifer, A., & Summers, L. H. (1985). The strategic bequest motive. Journal of Political Economy, 93, 1045–1076.CrossRef

Beverly, S., Sherraden, M., Cramer, R., Williams Shanks, T. R., Nam, Y., & Zhan, M. (2008). Determinants of asset holdings. In S.-M. McKernan & M. Sherraden (Eds.), Asset building and low-income families (pp. 89–152). Washington, DC: Urban Institute Press.

Blau, F. D., & Graham, J. W. (1990). Black-white differences in wealth and asset composition. Quarterly Journal of Economics, 105, 321–339.CrossRef

Bricker, J., Bucks, B., Kennickell, A., Mach, T., & Moore, K. (2011). Surveying the aftermath of the storm: Changes in family finances from 2007 to 2009 (Finance and Economics Discussion Series, Divisions of Research & Statistics and Monetary Affairs). Washington, DC: Board of Governors of the Federal Reserve System.

Bucks, B. K., Kennickell, A. B., Mach, T. L., & Moore, K. B. (2009). Changes in U.S. family finances from 2004 to 2007: Evidence from the Survey of Consumer Finances (Federal Reserve Bulletin). Washington, DC: Board of Governors of the Federal Reserve System.

Carasso, A., & McKernan, S.-M. (2008). Asset holdings and liabilities. In S.-M. McKernan & M. Sherraden (Eds.), Asset building and low-income families (pp. 33–66). Washington, DC: Urban Institute Press.

Chiteji, N., & Stafford, F. (1999). Portfolio choices of parents and their children as young adults: Asset accumulation by African-American families. American Economic Review, 89, 377–380.CrossRef

Conley, D. (1999). Being black, living in the red: Race, wealth, and social policy in America. Berkeley: University of California Press.

Cox, D. (1987). Motives for private income transfers. Journal of Political Economy, 95, 509–546.CrossRef

Cox, D. (1990). Intergenerational transfers and liquidity constraints. Quarterly Journal of Economics, 104, 187–218.CrossRef

Cox, D., & Jappelli, T. (1990). Credit rationing and private transfers: Evidence from survey data. Review of Economics and Statistics, 72, 445–454.CrossRef

Cox, D., & Raines, F. (1985). Interfamily transfers and income redistribution. In M. David & T. Smeeding (Eds.), Horizontal equity, uncertainty, and economic well-being (pp. 393–426). Chicago, IL: University of Chicago Press.

Cox, D., & Rank, M. R. (1992). Inter-vivos transfers and intergenerational exchange. Review of Economics and Statistics, 74, 305–314.CrossRef

Gale, W. G., & Scholz, J. K. (1994). Intergenerational transfers and the accumulation of wealth. Journal of Economic Perspectives, 8(4), 145–160.CrossRef

Gittleman, M., & Wolff, E. N. (2004). Racial differences in patterns of wealth accumulation. The Journal of Human Resources, 39, 193–227.CrossRef

Heflin, C. M., & Pattillo, M. (2002). Kin effects on black-white account and home ownership. Sociological Inquiry, 72, 220–239.CrossRef

Jayakody, R. (1998). Race differences in intergenerational financial assistance: The needs of children and the resources of parents. Journal of Family Issues, 19, 508–533.CrossRef

Kessler, D., & Masson, A. (1989). Bequest and wealth accumulation: Are some pieces of the puzzle missing? Journal of Economic Perspectives, 3(3), 141–152.CrossRef

Kochar, A. (1997). An empirical investigation of rationing constraints in rural credit markets in India. Journal of Development Economics, 53, 339–371.CrossRef

Kotlikoff, L., & Summers, L. (1981). The role of intergenerational transfers in aggregate capital accumulation. Journal of Political Economy, 89, 706–732.CrossRef

Kotlikoff, L., & Summers, L. (1988). The contribution of intergenerational transfers to total wealth: A reply. In D. Kessler & A. Masson (Eds.), Modeling the accumulation and the distribution of wealth (pp. 53–67). Oxford, UK: Clarendon Press.

Laferrere, A., & Wolff, F.-C. (2006). Microeconomic models of family transfers. In S.-C. Kolm & J. M. Ythier (Eds.), Handbook on the economics of giving, reciprocity and altruism (Vol. 2) (pp. 889–969). Amsterdam, The Netherlands: North Holland.

Lee, Y. G., & Horioka, C. Y. (2004). The strength and nature of bequest motives in the United States (Econometric Society 2004 Far Eastern Meetings Paper 675). Tokyo, Japan: Econometric Society, Far East Region.

Lee, Y.-J., & Aytac, I. A. (1998). Intergenerational financial support among whites, African Americans, and Latinos. Journal of Marriage and the Family, 60, 426–441.CrossRef

McGarry, K., & Schoeni, R. F. (1995). Transfer behavior in the Health and Retirement Study: Measurement and the redistribution of resources within the family. Journal of Human Resources, 30, S184–S226.CrossRef

McKernan, S.-M., Pitt, M., & Moskowitz, D. (2005). Use of the formal and informal financial sectors: Does gender matter? Empirical evidence from rural Bangladesh (World Bank Policy Research Working Paper 3491). Washington, DC: World Bank.

McKernan, S.-M., Ratcliffe, C., Steurle, E., & Zhang, S. (2013). Less than equal: Racial disparities in wealth accumulation (Urban Institute Research Brief). Washington, DC: The Urban Institute.

Menchik, P. L., & Jianakoplos, N. A. (1997). Black-white wealth inequality: Is inheritance the reason? Economic Inquiry, 35, 428–442.CrossRef

Modigliani, F. (1988). The role of intergenerational transfers and life cycle saving in the accumulation of wealth. Journal of Economic Perspectives, 2(2), 15–40.CrossRef

Oaxaca, R. (1973). Male-female wage differentials in urban labor markets. International Economic Review, 14, 693–709.CrossRef

Oliver, M. L., & Shapiro, T. M. (1995). Black wealth/white wealth: A new perspective on racial inequality. New York, NY: Routledge.

Ratcliffe, C., Chen, H., Williams Shanks, T. R., Nam, Y., Schreiner, M., Zhan, M., & Sherraden, M. (2008). Assessing asset data. In S.-M. McKernan & M. Sherraden (Eds.), Asset building and low-income families (pp. 239–270). Washington, DC: Urban Institute Press.

Schoeni, R. F. (1997). Private interhousehold transfers of money and time: New empirical evidence. Review of Income and Wealth, 43, 423–448.CrossRef

Shapiro, T., Meschede, T., & Osoro, S. (2013). The roots of the widening racial wealth gap: Explaining the black-white economic divide (Research and Policy Brief). Waltham, MA: Institute on Assets and Social Policy, Brandies University.

Shapiro, T. M. (2004). The hidden cost of being African American: How wealth perpetuates inequality. New York, NY: Oxford University Press.

Sherraden, M. (1991). Assets and the poor. New York, NY: M.E. Sharp, Inc.

Tomes, N. (1988). The Intergenerational transmission of wealth and the rise and fall of families. In D. Kessle & A. Masson (Eds.), Modeling the accumulation and distribution of wealth (pp. 147–165). Oxford, UK: Clarendon Press.

Wilhelm, M. O. (1986). Bequest behavior and the effect of heirs’ earnings: Testing the altruistic model of bequests. American Economic Review, 86, 874–892.

Wilhelm, M. O. (2001). The role of intergenerational transfers in spreading asset ownership. In T. M. Shapiro & E. N. Wolff (Eds.), Assets for the poor: The benefits of spreading asset ownership (pp. 132–161). New York, NY: Russell Sage Foundation.

Wolff, E. N. (2001). Recent trends in wealth ownership, from 1983 to 1998. In T. M. Shapiro & E. N. Wolff (Eds.), Assets for the poor: The benefits of spreading asset ownership (pp. 34–73). New York, NY: Russell Sage Foundation.

Wolff, F.-C., Spilerman, S., & Attias-Donfut, C. (2007). Transfers from migrants to their children: Evidence that altruism and cultural factors matter. Review of Income and Wealth, 53, 619–644.CrossRef

Zissimopoulos, J. (2001). Resource transfers to the elderly: Do adult children substitute financial transfers for time transfers? (RAND Labor and Population Program Working Paper Series 01-05). Santa Monica, CA: RAND.

Titel: Do Racial Disparities in Private Transfers Help Explain the Racial Wealth Gap? New Evidence From Longitudinal Data
verfasst von: Signe-Mary McKernan
Caroline Ratcliffe
Margaret Simms
Sisi Zhang
Publikationsdatum: 01.06.2014
Verlag: Springer US
Erschienen in: Demography / Ausgabe 3/2014
Print ISSN: 0070-3370
Elektronische ISSN: 1533-7790
DOI: https://doi.org/10.1007/s13524-014-0296-7

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 3/2014

Marriage Duration and Divorce: The Seven-Year Itch or a Lifelong Itch?

Divergence in Age Patterns of Mortality Change Drives International Divergence in Lifespan Inequality

Testing the Economic Independence Hypothesis: The Effect of an Exogenous Increase in Child Support on Subsequent Marriage and Cohabitation

Home Front: Post-Deployment Mental Health and Divorces

Redefining Neighborhoods Using Common Destinations: Social Characteristics of Activity Spaces and Home Census Tracts Compared

More Than One Million New American Indians in 2000: Who Are They?