The Black-White Achievement Gap and Family Wealth

This paper examines the extent to which family wealth mediates the race-child achievement association for young children. Our analyses focus on black-white achievement differences and are based on data from the Panel Study of Income Dynamics. We find weak evidence that wealth mediates the black-white test scores gap. However, wealth has some direct and indirect impact on children's test scores. For preschoolers, home equity has a positive effect on their problem solving skills though not on letter-word skills. For school-aged children, wealth in the top quartile and stock/mutual fund holding has a positive effect, while debts have a negatively effect on their math scores. Cash accounts have a marginally significant effect on children's reading scores. Family wealth appears to affect children's cognitive development through both material deprivation and family stress pathways, and many of these mediators have direct effect on children's test scores. For school-aged children, a wealth level in the top half of the distribution also has a positive effect on a child's self-esteem, which in turn is positively associated with his or her math score. Policy implications and limitations of these analyses are discussed. (NAEP) conducted from 1971 to 1996 showed a substantial lag in the achievement of black students vis-à-vis their white counterparts. These disparities have been observed to exist before children enter kindergarten, widen as they move through elementary and middle schools, and persist into adulthood (Phillips, Crouse and Ralph, 1998). Analyses by Hedges and Nowell (1998) show a decline in differences but a slowed rate of decrease since 1988. Results from the early 1990s, however, indicate that the gap had widened again (National Center for Education Statistics, 2000). The early achievement gap between blacks and whites not only has important implications for an individual's own life chances but also has intergenerational consequences through transmission of resources and values to the next generation. Understanding factors contributing to this gap, therefore, is of paramount importance. Much research has documented the association between children's cognitive achievement and parental SES as measured by education level, occupation, and income (see review in Bradley 2002). However, household wealth (i.e. net worth)-which displays a distribution that is more unequal than that for income-has received little attention in this body of literature. There are ample reasons to suspect that race differences in family wealth levels may help explain differences in child outcome measures. First, wealth displays greater racial disparities than any other socioeconomic …