Panel Paper: Private Transfers, Race, and Wealth

Thursday, November 8, 2012 : 1:35 PM
Pratt B (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Signe-Mary McKernan1, Caroline Ratcliffe2, Margaret Simms1 and Sisi Zhang1, (1)Urban Institute, (2)The Urban Institute

How do private transfers differ by race and ethnicity and do such differences explain the racial and ethnic disparity in wealth? Using the Panel Study of Income Dynamics, this study examines private transfers by race and ethnicity and explores a causal relationship between private transfers and wealth. We examine private transfers in the form of financial support received and given from extended families and friends, as well as large gifts and inheritances. Our findings highlight important differences in private transfers by race and ethnicity: African Americans and Hispanics (both immigrant and non-immigrant) receive less in private transfers than non-Hispanic whites. Private transfers in the form of large gifts and inheritances (but not net support received) are importantly related to increases in wealth overall and for whites and black non-Hispanics. In total, we estimate that the African American shortfall in large gifts and inheritances accounts for 12 percent of the white-black racial wealth gap.