Race and wealth inequality: The impact of racial differences in asset ownership on the distribution of household wealth

What accounts for persistent racial differences in wealth ownership? Previo us research has debated the role that differences in asset ownership play i n creating and maintaining wealth inequality. I use survey data to model th e ownership of seven assets and find that whites are indeed more likely tha n blacks to buy high-risk, high-return assets. I then use a simulation mode l to explore the effect that these differences have on the distribution of wealth. I separate the effects of asset ownership from the effects of racia l differences in family wealth history, earnings, education, marital behavi or, fertility, and other influences on wealth inequality. I find that remov ing racial differences in asset ownership reduced wealth inequality drastic ally, but not completely, and that racial differences in educational attain ment account for much of the remaining difference. I estimate how changes i n historical patterns of portfolio behavior and educational attainment woul d have reduced inequality, and I explore the implications of these findings for reducing wealth inequality in the future. (C) 2000 Academic Press.