Culture and its influence on asset accumulation-Some views from economics

Ngina Chiteji, Ph.D.Department of Economics

Skidmore CollegeSaratoga Springs, NYnchiteji@skidmore.edu

Asset Building: The Perspectives of People of ColorConvened by the National Economic Development & Law Center

Tuskegee, Alabama,  October 2 – 4, 2005Funded by the Ford Foundation

"...the values and skills absorbed through membership in a particular

family culture."

"Children from successful families are more likely to be successful themselves by virtue of.....

....their superior endowment of culture and genes."

-Both quotes from Gary Becker, Economist and author of Treatise on the Family (p.179)

Q1: Is there any influence of culture on

asset accumulation?

Q2: Why even pose this question?

• Y = B0 + B1 race + Bz Z + ξ

• Where Z is a vector of exogenous variables.

• The fight is over how to interpret the regression output if B1 is found to be negative and statistically significant.

Table 1. Families' wealth (net worth) by race and ethnicity (2001 data)

Source: Aizcorbe et al 2003 and Leigh (2004) Table 2b in Chpt. 2 of Wealth Accumulation and Communities of Color in the United States (edited by Gordon-Nembhard and Chiteji)

$482,900.00

$115,300.00 $120,900.00

$17,100.00

$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

$400,000.00

$450,000.00

$500,000.00

Mean Net Worth Median Net Worth

White

Non-White

Table 1. Families' wealth (net worth) by race and ethnicity (2001 data, in thousands)

Source: Aizcorbe et al 2003 and Leigh (2004) Table 2b in Chpt. 2 of Wealth Accumulation and Communities of Color in the United States (edited by Gordon-Nembhard and Chiteji)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Equity in MotorVehicles

Equity in OwnHome

Interest-EarningAssets at Financial

Institutions

Regular CheckingAccounts

Blacks

Hispanic-Origin

Whites

Whites Non-HispanicAll

Table 3. Asset accumulation in terms of portfolio composition: the five most popular portfolio types by race

    All households     White households    Black households  

  Rank   %  cum. %   %  cum. %   %  cum. %

Married  1 (C)(H)(T)  18 18 (C)(SI)(H)(T)  17 17 (C)(H)(T)  23 23

2 (C)(SI)(H)(T)  16 34 (C)(H)(T)  17 34 (H)(T)  10 33

3 (C)(SI)(V)(H)(T)  7 41 (C)(SI)(V)(H)(T)  8 43 (C)(T)  9 42

4 (C)(T)  5 47 (R)(C)(SI)(H)(T)  5 48 (C)(SI)(H)(T)  8 50

5 (R)(C)(SI)(H)(T)  5 51 (B)(C)(SI)(H)(T)  5 53 (T)  6 56

Single  1 (C)(T)  17 17 (C)(T)  18 18 no  21 21

2 (C)(H)(T)  12 29 (C)(H)(T)  13 31 (T)  16 37

3 (T)  9 38 (C)(SI)(H)(T)  10 41 (C)(T)  12 49

4 (C)(SI)(H)(T)  8 46 (T)  6 47 (C)(H)(T)  10 59

5 no  8 53 (C)(SI)(T)  5 52 (C)  8 66

Distribution of the 5 most popular portfolio types: C -transaction account(s), SI-stocks (IRA accounts incl.), B-business, V-other assets, H-housing (primary residence), T-vehicle

Taken from Gouskova, Stafford and Chiteji (2004), Table 2, Chpt. 3 in Wealth Accumulation and Communities of Color in the United States.

Table 2. Asset accumulation represented in terms of whether families hold very basic or highly sophisticated portfolios--the

percentage of families who own 0 to 6 or more assets Portfolio span

  0 1 2 3 4 5 6up

Total     3.5 8.8 17.1 24.7 23 15.8 7.1

Age of Head  30-44  4.7 10.8 20.3 27.2 20.5 11.8 4.8

   45-59  2.2 6.6 13.6 22.1 25.8 20.2 9.6

Race of Head 

White  1.1 5.4 14.5 25.4 25.7 19 8.9

    Black 16.5 23.4 23 21.2 9.8 4.7 1.4

Years of Education 

No High School Degree  10.2 17.1 29.5 21.9 13.7 4.9 2.8

  High School Degree  4.1 11.3 19.8 27.6 18.6 12.8 5.8

   Some College  2.9 7.4 14.6 28.8 23.2 17.1 6

  College Degree or more 0.1 2.2 10.8 20 31.9 23.1 11.8

Gender of Head 

Male  1.9 6.5 13.7 25.6 25.4 18.1 8.9

   Female  8.2 15.6 27.1 22.2 16.1 9 1.8

Marital Status  Married  0.7 3.6 11.3 25.3 28.1 20.7 10.3

   Not Married  7.5 16.3 25.2 23.9 15.8 8.8 2.5

Number of obs.

  276 553 904 1201 989 604 269

Taken from Gouskova, Stafford and Chiteji (2004),Table 1, Chpt. 3 in Wealth Accumulation and Communities of Color in the United States.

Thank you Presentation by Ngina Chiteji, Ph.D.