What Explains Inequality?
By Arnold Kling
Two new books give provocative answers. According to Houses Divided, reviewed here,
Thomas M. Shapiro argues in this sober and authoritative book that we should look to disparities of wealth for the answer…Whites start out ahead because they inherit more from their parents, and America’s racially segregated housing markets boost whites’ home equities, while depressing those of African-American families.
According to The Pecking Order, reviewed here,
differences between families explain only 25 percent of the nation’s income inequality; the remaining 75 percent is explained by differences between siblings.
Finally, it is worth re-reading Tyler Cowen’s summary of an article by Kerwin Kofi Charles and Erik Hurst.
The age-adjusted intergenerational wealth elasticity is 0.37. What does this mean? If parents have wealth 50 percent over the mean in their generation, the wealth of their children will be 18 percent above the mean in the childrens’ generation.
…Income levels account for about one-half of the parent-child wealth relationship. In other words, high income parents tend to produce high income children, to some extent. The children earn much of their wealth. Education and financial gifts account for very little of the correlation across parents and children.
For Discussion. What new research questions are suggested by the results of these three studies?