Quantifying Explanations for Black-White Wealth Inequality∗

The black-white wealth gap is large, and regressions of wealth on income and demographics can explain only a fraction of it. A standard Blinder-Oaxaca decomposition finds that the average black household, with $45,467 in net wealth, would have $67,975 (i.e. 49.5% more) if it were white but other characteristics were unchanged. Many explanations for this gap have been proposed, but few have been tested. This paper uses a structural model of consumption, savings, and portfolio choice over the lifecycle to quantify the importance of old and new explanations for the black-white wealth gap. Preliminary results suggest that income is important but not as central as previous regression-based studies have found, while a previously ignored factor mortality may play a modest role in the black-white wealth gap. ∗My advisor, Raquel Fernández, provided invaluable support with this paper. I would also like to thank Christopher Flinn, Kevin Thom, Ahu Gemici, Gianluca Violante, Joseph Mullins, David Evans, Andrew Demers, and Elliot Lipknowski for many very useful comments.