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Working Paper
Accounting for racial wealth disparities in the United States
Using data from the Survey of Consumer Finances, this paper updates and extends previous research on the racial wealth gap in the United States. We explore several hypotheses that help explain differential wealth accumulation by racial groups, including the importance of receiving inheritances and other financial support from relatives and the conditions in local real estate markets. By exploring the disparities among white, black, and Hispanic families, we make new contributions to the literature. We find that observable factors account for the entire wealth gap between white and Hispanic ...
Working Paper
Measuring Income and Wealth at the Top Using Administrative and Survey Data
Administrative tax data indicate that U.S. top income and wealth shares are substantial and increasing rapidly (Piketty and Saez 2003, Saez and Zucman 2014). A key reason for using administrative data to measure top shares is to overcome the under-representation of families at the very top that plagues most household surveys. However, using tax records alone restricts the unit of analysis for measuring economic resources, limits the concepts of income and wealth being measured, and imposes a rigid correlation between income and wealth. The Survey of Consumer Finances (SCF) solves the ...
Report
Understanding the Linkages between Climate Change and Inequality in the United States
We conduct a review of the existing academic literature to outline possible links between climate change and inequality in the United States. First, researchers have shown that the impact of both physical and transition risks may be uneven across location, income, race, and age. This is driven by a region’s geography as well as its adaptation capabilities. Second, measures that individuals and governments take to adapt to climate change and transition to lower emissions risk increasing inequality. Finally, while federal aid and insurance coverage can mitigate the direct impact of physical ...
Working Paper
The Optimal Taxation of Business Owners
Business owners in the United States are disproportionately represented among the very wealthy and are exposed to substantial idiosyncratic risk. Further, recent evidence indicates business income primarily reflects returns to the human (rather than financial) capital of the owner. Motivated by these facts, this paper characterizes the optimal taxation of income and wealth in an environment where business income depends jointly on innate ability, luck, and the accumulated past effort exerted by the owner. I show that in (constrained) efficient allocations, more productive entrepreneurs ...
Working Paper
Levels and trends in the income mobility of U.S. families, 1977−2012
Much of America?s promise is predicated on economic mobility?the possibility that people can move up and down the economic ladder during their lifetimes. Mobility is of particular consequence when economic disparities are increasing. Using panel data and mobility concepts and measures adapted from the literature, this paper examines 10-year income mobility levels and trends for U.S. working-age families during the time span 1977?2012. According to many measures, mobility, already limited in the 1978?1988 decade, declined over ensuing decades: families? later-year incomes increasingly depended ...
Working Paper
Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance
In this paper, we present updated measures of racial disparities in wealth using the most recent data from the Survey of Consumer Finances (SCF), augmented by household-level estimates of defined benefit (DB) pension wealth developed by Sabelhaus and Volz (2020). Including this important asset, we find that racial wealth disparities are smaller than the numbers typically discussed in other research or in the media, but the disparities remain substantial. The paper proceeds by exploring two specific factors that have long been identified as playing potentially important roles in generating ...
Working Paper
Should defaults be forgotten? Evidence from variation in removal of negative consumer credit information
Practically all industrialized economies restrict the length of time that credit bureaus can retain borrowers? negative credit information. There is, however, a large variation in the permitted retention times across countries. By exploiting a quasi-experimental variation in this retention time, we investigate what happens when negative information is deleted earlier from credit files. We find that the loss of information led banks to tighten their lending standards significantly as the expected retention time was diminished from on average three-and-a-half to three years exactly. ...
Working Paper
Measuring Intergenerational Income Mobility: A Synthesis of Approaches
The literature on intergenerational income mobility uses a diverse set of measures and there is limited knowledge about whether these measures provide similar information and yield similar conclusions. We provide a framework to highlight the key concepts and properties of the different estimators. We then show how these measures relate to one another empirically. Our main analysis uses income tax data from Australia to produce a comprehensive set of empirical estimates for each of 19 different mobility measures at both the national and regional level. We supplement this analysis with other ...
Working Paper
Updating the Racial Wealth Gap
Using newly available data from the Survey of Consumer Finances, this paper updates and extends the literature exploring the racial wealth gap. We examine several hypotheses proposed by previous researchers, including the importance of inherited wealth and other family support and that of trends in local real estate markets, and also extend the literature by exploring the gap across the distribution of wealth and simultaneously considering white, African American and Hispanic households. The findings indicate that observable factors account for all of wealth gap between white and Hispanic ...
Discussion Paper
Did Changes to the Paycheck Protection Program Improve Access for Underserved Firms?
Prior research has shown that many small and minority-owned businesses failed to receive Paycheck Protection Program (PPP) loans in 2020. To increase program uptake to underserved firms, several changes were made to the PPP in 2021. Using data from the Federal Reserve Banks’ 2021 Small Business Credit Survey, we argue that these changes were effective in improving program access for nonemployer firms (that is, businesses with no employees other than the owner(s)). The changes may also have encouraged more applications from minority-owned firms, but they do not appear to have reduced ...