Wealth of Two Nations: The U.S. Racial Wealth Gap, 1860-2020
The racial wealth gap is the largest of the economic disparities between Black and white Americans, with a white-to-Black per capita wealth ratio of 6 to 1. It is also among the most persistent. In this paper, we construct the first continuous series on white-to-Black per capita wealth ratios from 1860 to 2020, drawing on historical census data, early state tax records, and historical waves of the Survey of Consumer Finances, among other sources. Incorporating these data into a parsimonious model of wealth accumulation for each racial group, we document the role played by initial conditions, income growth, savings behavior, and capital returns in the evolution of the gap. Given vastly different starting conditions under slavery, racial wealth convergence would remain a distant scenario, even if wealth-accumulating conditions had been equal across the two groups since Emancipation. Relative to this equal-conditions benchmark, we find that observed convergence has followed an even slower path over the last 150 years, with convergence stalling after 1950. Since the 1980s, the wealth gap has widened again as capital gains have predominantly benefited white households, and income convergence has stopped.
We thank William Darity, Jr., Anne Hannusch, Damon Jones, Trevon Logan, Robert Margo, Suresh Naidu, Martha Olney, Fabian Pfeffer, David Romer, Emmanuel Saez, William Spriggs, Jón Steinsson, Alan Taylor, Gabriel Zucman, and members of the Economics of Racism, UC Berkeley Economic History, MIT Sloan Finance, Stanford Labor and Economic History, UC Santa Barbara Broom Center, Oxford Economic History, and Columbia Macro seminars, among others, for valuable feedback. We also thank all participants of the NBER Race and Stratification program meeting, the NBER Summer Institute Development of the American Economy program meeting, the NBER Fall Public Economics program meeting, and the ASSA 2022 annual meeting. We thank Soumyajit Mazumder for generously sharing data for the state of Georgia; we thank Geoff Clarke for sharing data on the balance sheets of Black banks in Virginia and for providing us with valuable insights on Black financial wealth during the 1930s; and we thank Luis Bauluz and Alice Henriques Volz for sharing data and code. Victoria Agwam, Isbah Bandeali, Santiago Deambrosi, Kendra Marcoux, Will McGrew, and Moritz Scheidenberger provided outstanding research assistance. This work is generously supported by the Russell Sage Foundation (Award # 2011-29464) and Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) under Germany’s Excellence Strategy – EXC 2126/1 – 3“ 390838866 and the CRC TR 224. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- The wealth gap between White and Black Americans is nearly as large today as it was in the 1950s. In Wealth of Two Nations: The US...