Working Paper: CEPR ID: DP15182
Authors: Giacomo De Giorgi; Luca Gambetti; Costanza Naguib
Abstract: 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).
Keywords: Inequality; Consumption; Income; Health; Persistence
JEL Codes: E21; E63; D12; C3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shorter life expectancy for blacks (I14) | lower savings (D14) |
| shorter life expectancy for blacks (I14) | lower wealth accumulation (E21) |
| lower savings (D14) | higher consumption risk (D11) |
| lower wealth accumulation (E21) | higher consumption risk (D11) |
| lower life expectancy for blacks (I14) | lower cash savings (D14) |
| lower life expectancy for blacks (I14) | worse health insurance coverage (I13) |
| lower life expectancy for blacks (I14) | lower insurance against income shocks (G52) |
| lower life expectancy for blacks (I14) | lower percentile in consumption distribution (D12) |
| lower life expectancy for blacks (I14) | less persistence in consumption (D15) |