The racial/ethnic gap in financial literacy in the population and by income

• Published in: Contemporary economic policy Vol. 39; no. 3; pp. 524 - 536
• Main Authors: Angrisani, Marco, Barrera, Sergio, Blanco, Luisa R., Contreras, Salvador
• Format: Journal Article
• Language: English
• Published: Boston, USA Wiley Periodicals, Inc 01.07.2021; Western Economic Association
• Subjects: Childhood; Economic policy; financial knowledge; Financial literacy; Latin American cultural groups; Literacy; Minority groups; Neighborhoods; racial/ethnic disparities; Socioeconomic factors; Socioeconomic status; United States > US
• ISSN: 1074-3529; 1465-7287
• DOI: 10.1111/coep.12507

We investigate the determinants of the racial/ethnic gap in financial literacy in the general population and within income classes, with a focus on childhood family circumstances and neighborhood socioeconomic characteristics. Our model explains 48% and 57% of the observed gap for Blacks and Hispanics, respectively. For both groups, differences in individual characteristics and neighborhood socioeconomic status contribute the most to the explained gap. The White–Minority gap narrows when moving from low‐ to high‐income classes, but the ability of the model to explain it decreases monotonically. Identifying which additional barriers put minorities at a disadvantage is key to improve financial literacy.