Ethnic and Racial Disparities in Saving Behavior
By Mariela Dal Borgo (Bank of Mexico)
Using pre-retirement data from the Health and Retirement Study, I find that median saving rates are 9p.p. larger for Whites than for Mexican Americans and Blacks. Two-thirds of each gap reflect changes in asset prices and a third reflects households’ active saving decisions. Since Blacks save more in pensions, only the racial gap disappears with the inclusion of retirement assets. Both saving gaps are mostly explained by differences in income and, especially for Mexican Americans, education, and less by demographic characteristics. These findings suggest that conditional differences in saving rates are not driving wealth inequality, except among White and Black households with high saving rates. Interventions tackling inequality in income and education should be useful to reduce the ethnic and racial wealth gaps.
Full Content: SSRN
