Black/White Disparities in Household Debt

• In Event: 2166 - Section on Racial and Ethnic Minorities Refereed Roundtables
  In Refereed Roundtable 100min: Table 15: Race & Economics

Abstract

In this paper, I investigate racial disparities in debt. The majority of American households owe money to a financial institution. Relatively little sociological research, however, has examined disparities in debt and their consequences for the reproduction of social inequality. Most research has focused instead on net worth, of which debt is only one component. Using data from the Survey of Consumer Finances, I present models of racial differences in total debt, in types of debt held (housing, student, and consumer debt), and in monthly debt service payments. I find that while Black households tend to have much lower debt levels than Whites on average, this gap is entirely explained by racial differences in income and assets. At equal asset levels, Black households actually tend to have higher debt levels than Whites. Black households tend to hold more of their debt as student debt, which is riskier and more difficult to liquidate than housing debt. As a result of higher debt levels, Black households also experience higher monthly debt costs. Together, these estimates suggests that at equal asset levels Black households are more leveraged, face greater financial risk, and have less disposable income for consumption and investments than White households do. Additional models indicate that racial differences in financial skills and habits do not explain these patterns.

Author

• Raphaël Charron-Chénier, Arizona State University