Do Racial Disparities in Private Transfers Help Explain the Racial Wealth Gap? New Evidence from Longitudinal Data

Signe-Mary McKernan, Urban Institute
Caroline Ratcliffe, Urban Institute
Margaret Simms, Urban Institute
Sisi Zhang, 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 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.