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Our most academic publication offers research and surveys on monetary policy, national and international developments, banking, and more. The content is written for an economically informed readership—from the undergraduate student to the PhD.

Vol. 99, No. 1 (Posted 2017-02-15)

“Family Achievements?”: How a College Degree Accumulates Wealth for Whites and Not For Blacks

by Tatjana Meschede, Joanna Taylor, Alexis Mann, and Thomas Shapiro

A college education has been linked to higher life-time earnings and better economic achievements, so the expectation would be that it is also linked to higher net wealth for everybody. However, recent analyses challenge this hypothesis and find that the expectation holds true for White college-educated households but not for Black college-educated households. To examine this finding further and investigate the role of family financial transfers in household net wealth, the authors perform a mixed-method study using data from the Panel Study of Income Dynamics for a 24-year period, 1989-2013, and qualitative data from the Institute on Assets and Social Policy Levering Mobility study. Their results confirm that White college-educated households amass wealth, whereas the wealth of their Black counterparts declines. The authors also estimate the impact of just inheritance or large financial gifts and find that they decrease the existing racial wealth gap by nearly $40,000, or 20 percent. Further analyses demonstrate that White college graduates are significantly and substantially more likely to provide and receive financial support for education and/or a home purchase, while Black college graduates are significantly more likely to financially support their parents. Multivariate regression analysis identifies receipt of financial support for education and a home purchase as a positive contributor to net wealth and financial help for parents as a negative contributor to net wealth, disadvantaging Black college-educated households, who are less likely to receive and more likely to give financial support. Longitudinal interview data collected in the Institute on Assets and Social Policy Leveraging Mobility study illustrate the mechanisms of family financial transfers and their relationship to wealth accumulation, contrasting the White and Black households’ experiences. The discussion underscores the need to better understand intergenerational wealth and wealth sharing within families when studying wealth outcomes and highlights the role of family financial wealth transfers in creating opportunities for those who benefit the most—mostly White college-educated households.

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https://doi.org/10.20955/r.2017.121-137

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