For over fifty years, from the end of Jim Crow to the present, the racial wealth gap in the U.S. has been large and persistent. To explore the necessity and efficacy of reparations to closing this wealth gap, this thesis develops an overlapping generations model with inheritance motives and two distinct types of households (white and black) that isolates the impact of the large \"initial\" wealth gap in 1962 and households' ability to transfer wealth across generations, on the dynamics of the wealth gap in the long run. The model predicts that one component of the initial gap, firm ownership, coupled with the intergenerational transfer of that ownership, results in a permanent gap in overall wealth. The racial gap in firm ownership allows white households to receive a larger share of the economy's aggregate profits every period than black households, so white households can consistently leave higher levels of physical capital (the proxy for wealth in the model) to the next generation. Crucially, these factors result in a persistent and rigid wealth gap independent of any other dimensions of racial inequality (overt discrimination, earnings, education, etc.). This observation captures the central result of this thesis, that even if all forms of discrimination against black Americans had ceased upon the end of Jim Crow, the wealth gap would have persisted in the absence of a reparations policy addressing the fact that the initial firm ownership gap arose in the first place. When a race targeted wealth transfer program is introduced as a reparations policy to the baseline model, I find that the program can help close the racial wealth gap, but that a direct transfer of firm ownership from white households to black households is a more effective policy.
"},{"label":"Degree","value":["Bachelor of Arts with Departmental Honors"]},{"label":"Author-supplied Keywords","value":["Racial wealth gap","Stratification economics","Overlapping generations model"]},{"label":"Administrative Note","value":"Drupal Node ID: 23695