What Role for ‘Generational Wealth’ in Explaining Racial Wealth Disparities?

What Role for ‘Generational Wealth’ in Explaining Racial Wealth Disparities? | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article What Role for ‘Generational Wealth’ in Explaining Racial Wealth Disparities? John Sabelhaus, Jeffre Thompson This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-3547143/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract In light of a recent surge of interest in the topic of “generational wealth” and its potential to close racial disparities in wealth, this paper revisits an older literature with updated data and methods. Previous research found that inherited wealth contributed only modestly to racial disparities in wealth, or even reduced those disparities, but suffered from numerous shortcomings. This paper uses more recent data (through 2019) that recovers intergenerational transfers not reflected in prior research. We also include the asset value of defined benefit pensions – a source that accounts for 15 percent of all household wealth and is of particular importance for non-white households – into our measure of wealth, and exploit nonparametric decomposition techniques. Despite these innovations, our findings are consistent with earlier research that intergenerational transfers can account for a relatively small share of the racial disparities in wealth that we observe in the data. When no other controls are included, we find that differences in intergenerational transfers account for 13 to 16 percent of white/non-white private wealth gaps. When we control for lifetime earnings, workplace pensions, and a handful of additional human capital variables, the marginal contribution of intergenerational transfers shrinks considerably, but the combined portion of the racial wealth gap that is explained rises to 80 to 90 percent. Policymakers interested in helping households build wealth are advised to look to ways that would enable them to boost the earnings that they receive over their lifetime. Wealth Inequality Racial Disparities Inheritance Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-3547143","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":245536506,"identity":"c59389b9-218e-4771-93f0-85be8ca8b7d1","order_by":0,"name":"John Sabelhaus","email":"","orcid":"","institution":"Brookings Institution","correspondingAuthor":false,"prefix":"","firstName":"John","middleName":"","lastName":"Sabelhaus","suffix":""},{"id":245536510,"identity":"2dd0cab2-9e20-4f99-9814-2390adbd289c","order_by":1,"name":"Jeffre Thompson","email":"data:image/png;base64,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","orcid":"","institution":"Federal Reserve Bank of Boston","correspondingAuthor":true,"prefix":"","firstName":"Jeffre","middleName":"","lastName":"Thompson","suffix":""}],"badges":[],"createdAt":"2023-11-02 21:14:28","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-3547143/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-3547143/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":71747664,"identity":"a76f9562-5643-494c-b648-e297ac40a115","added_by":"auto","created_at":"2024-12-18 09:02:16","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":553833,"visible":true,"origin":"","legend":"","description":"","filename":"generationalwealthfinalmanuscriptJOEI.pdf","url":"https://assets-eu.researchsquare.com/files/rs-3547143/v1_covered_3c667c66-7b9c-4d11-91fa-30aabbde43ab.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"What Role for ‘Generational Wealth’ in Explaining Racial Wealth Disparities?","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Wealth, Inequality, Racial Disparities, Inheritance","lastPublishedDoi":"10.21203/rs.3.rs-3547143/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-3547143/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eIn light of a recent surge of interest in the topic of \u0026ldquo;generational wealth\u0026rdquo; and its potential to close racial disparities in wealth, this paper revisits an older literature with updated data and methods. Previous research found that inherited wealth contributed only modestly to racial disparities in wealth, or even reduced those disparities, but suffered from numerous shortcomings. This paper uses more recent data (through 2019) that recovers intergenerational transfers not reflected in prior research. We also include the asset value of defined benefit pensions \u0026ndash; a source that accounts for 15 percent of all household wealth and is of particular importance for non-white households \u0026ndash; into our measure of wealth, and exploit nonparametric decomposition techniques. Despite these innovations, our findings are consistent with earlier research that intergenerational transfers can account for a relatively small share of the racial disparities in wealth that we observe in the data. When no other controls are included, we find that differences in intergenerational transfers account for 13 to 16 percent of white/non-white private wealth gaps. 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