Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283307 
Year of Publication: 
2023
Series/Report no.: 
ECONtribute Discussion Paper No. 265
Publisher: 
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
Abstract: 
Black Americans face higher cyclical unemployment risk than white Americans: job-finding rates during recessions are lower and the risk of becoming long-term unemployed is higher. Differences in unemployment risk across Black and white Americans imply that Black Americans optimally invest less in risky assets. We show that differences in unemployment risk can explain up to 90% of the gap in the stock market shares of Black and white portfolios, resulting in lower returns on wealth for Black Americans. Through this portfolio channel, adverse labor market conditions for Black Americans translate into lower wealth returns and exacerbate racial wealth inequality.
Document Type: 
Working Paper

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