De Giorgi, Giacomo Gambetti, Luca Naguib, Costanza
Year of Publication:
Discussion Papers No. 21-03
University of Bern, Department of Economics, Bern
Life expectancy for Blacks is about 8 year shorter than for Whites. A shorter life expectancy, in line with the theoretical prediction of a simple model, determines a much lower amount of savings and wealth accumulation and therefore a lower degree of insurance. This, in turn, contributes to persistent racial differentials in life-cycle consumption.Starting from the same position in the consumption distribution Blacks end up in a lower percentile than Whites after a few decades. This is particularly marked for those Blacks who start at the top of the consumption distribution, where Whites are much more persistent. We document these facts using 40 years of PSID data (1981-2017).
Consumption Income Earnings persistence quintile transitions