Saturday, November 10, 2012
International C (Sheraton Baltimore City Center Hotel)
*Names in bold indicate Presenter
Originating in a housing market crash and catalyzed by subsequent disruptions in the financial market, the Great Recession began with a large-scale destruction of household wealth. This paper will describe how the Great Recession altered prior trends in wealth inequality and how the distribution of net worth and different types of assets changed during the recession as well as the recovery period. We extend our analyses of the immediate aftermath of the Great Recession and provide new estimates on how wealth losses were recovered by some households but not others in the years following the Great Recession based on the pre-recession (2003, 2005, 2007) and post-recession waves (2009, 2011) of the Panel Study of Income Dynamic (PSID). We use the PSID data to analyze how changes in net worth and different wealth components (home equity, financial assets, real assets, debts) before, during, and after the Great Recession differed by families’ long-term economic position and demographic characteristics in an effort to identify those factors and events that have made families vulnerable to the recession and its aftermath.
Early evidence on the social effects of the recession suggests that the group that will suffer the most pronounced and potentially long-lasting effects is young adults. This contribution will also investigate whether the loss of family wealth is associated with adverse educational outcomes for young adults. We relate the value of parents’ net worth and its changes to the educational outcomes of young adults (college enrollment, persistence, and graduation) available in the 2005, 2007, and 2009 PSID Transition to Adulthood supplement. By studying whether wealth losses triggered adjustments in young adults’ educational pathways and altered the relationship between parental wealth and children’s educational outcomes, we can answer whether the recession carries important intergenerational spillover effects through the loss of family wealth.