The Long Road to Equality: Racial Capital and Generational Convergence

The slow convergence of racial disparities in economic outcomes since 1870 suggests a high degree of intergenerational persistence in socioeconomic status at the group level. In contrast, microdata-based estimates of family-level intergenerational mobility suggest much lower persistence. These models also consistently find large, unexplained racial gaps in mobility—even after controlling extensively for family and neighborhood characteristics—implying continued slow convergence in the future. To reconcile these patterns, we introduce the concept of racial capital: the collective material and nonmaterial assets of the racial groups to which a child is exposed while growing up. We show that racial capital (i) explains a substantial share of racial gaps in adult outcomes, (ii) significantly narrows and often reverses estimated racial mobility gaps, and (iii) has the strongest effects where racial dissociation from the White majority group is greatest, as measured by residential and marriage segregation. Unlike standard models, our framework predicts a long-run steady state of near racial equality, but also highlights how the influence of racial capital substantially slows the path to that equilibrium.