The Rising Importance of Stock-Linked Assets in the Black-White Wealth Gap

Abstract

Studies have exam ined the racial disparities in house hold char ac ter is tics, homeownership, and familial trans fer as pri mary driv ers of the Black-White wealth gap in the United States. This study assesses the impor tance of stock-linked assets in generating wealth inequality. As financial assets become a growing component of house- hold port fo lios, the Black-White wealth gap is increas ingly asso ci ated with the racial dis par ity in stock-linked assets. Using data from the Survey of Consumer Finances and the Panel Study of Income Dynamics, this study shows that the contribution of stock -linked assets to the Black-White wealth gap has expanded in both absolute and relative terms, surpassing those of homeownership and business equity. Furthermore, a substantial disparity in financial wealth exists even for otherwise similar Black and White house holds. Although the dis par ity is larger among those with more eco nomic resources, a gap remains among those with less. Lastly, our anal y sis shows that the combination of lower ownership levels and lower returns on financial wealth among Black house holds could account for a quar ter of the Black-White wealth accu mu la tion gap, net of differences in current net worth and household characteristics. Our findings suggest that considering financial assets is critical for understanding contemporary racial wealth inequal ity.