Paper Spotlight: Does Homeownership Reduce Wealth Disparities for Low-Income and Minority Households?

Ashleigh Eldemire

Kimberly F. Luchtenberg

Matthew M. Wynter









Wealth inequality has significantly widened in the U.S. over the last few decades. One way that wealth is built is through homeownership. Expanding homeownership among low-income and minority groups is seen as an important public policy in the U.S. to tackle the wealth gap.

But how important is homeownership in tackling wealth inequality? Ashleigh Eldemire, Kimberly F. Luchtenberg, and Matthew M. Wynter investigate this very important question in their paper “Does Homeownership Reduce Wealth Disparities for Low-Income and Minority Households?”  The authors use the U.S. Department of Housing and Urban Development’s (HUD) Housing Choice Voucher (HCV) program as the laboratory to answer the question. The program provides eligible low-income households assistance with either rental payments or mortgage payments and homeownership expenses. In their analysis, the authors trace the changes in wealth outcomes of low-income households that went from getting housing assistance for tenancy to becoming homeowners. This empirical strategy takes care of unobservable factors across households that could affect wealth accumulation, while allowing wealth outcomes to vary by race.

The authors find that on average low-income households gain $3.3K in wealth as homeowners compared to being renters. Less wealth accumulation for minority-headed households is observed, consistent with recent results showing that homeownership does not reduce racial gaps in wealth. There is also evidence pointing to increased labor supply following the transitioning to homeownership but even here there is a disparity across different segments: minority households have comparable incomes but show lower work force participation rates. Neighborhood selection is a very important channel that can explain why minority-headed households end up with lower wealth outcomes. The other two channels are the financial fragility of the household, and timing of the home purchase.

Spotlight by Camelia Kuhnen
Photos courtesy of Ashleigh Eldemire, Kimberly F. Luchtenberg, and Matthew M. Wynter

Winners of the RCFS Awards

The winners of the annual RCFS Awards were announced at the Awards Reception on May 23 as part of the SFS Cavalcade. We are pleased to share the winners:

Best Paper Award
“Wages and Firm Performance: Evidence from the 2008 Financial Crisis”
Paige Ouimet and Elena Simintzi
Prize: $10,000

Referee of the Year
Jessica Jeffers
Prize: $1000

Rising Scholar Award (tie)
Michael D. Wittry for “Crisis Poison Pills” by Ofer Eldar and Michael D. Wittry
Prize: $2500

Yan Xiong for “Information Bias in the Proxy Advisory Market” by Shichao Ma and Yan Xiong
Prize: $2500

Best Registered Report (tie)
“Does Homeownership Reduce Wealth Disparities for Low-Income and Minority Households?” Ashleigh Eldemire, Kimberly F Luchtenberg, and Matthew Wynter
Prize: $2500

“Hidden Preferences: Salary History Ban and Gender Pay Gap”
Jesse Davis, Paige Ouimet, and Xinxin Wang
Prize: $2500

Congratulations to all our award winners!

Paper Spotlight: The Disparate Effect of Nudges on Minority Groups

Maya Haran Rosen

Orly Sade

Nudges have long been recognized as devices that can influence individuals to take positive actions. Because they are relatively cheap to implement, effective nudges can be a useful policy tool. But can nudges lead to or even exacerbate differences in outcomes across different groups of people?

In “The Disparate Effect of Nudges on Minority Groups,” Maya Haran Rosen and Orly Sade explore this question in the context of the Savings for Every Child Program in Israel. Under this program, launched in 2017, for every child under eighteen the Israeli government deposits some money each month into a savings account. Parents can elect to save additional amounts for the child from their own finances and to make investment choices.

After the program was launched, text message nudges were sent to households drawn largely from two geographic areas. The authors find that, on the whole, the nudge was effective in inducing active participation from parents. However, the response from two minority groups in Israel, Arabs and Ultra-Orthodox Jews, was only half as large as from the general population. The authors show that the reasons for the lower response from the minority groups include lower digital literacy (specifically, less use of smartphones), weaker trust in the government, and lower financial literacy. However, even accounting for all these factors, there is a gap in the response from the minority groups, suggesting that unobserved cultural effects may also play a role. The overall message is that even well-intended policies that require target recipients to take an active step can sometimes generate disparities.

Spotlight by Uday Rajan
Photos courtesy of Maya Haran Rosen and Orly Sade

Paper Spotlight: What’s Good for Women Is Good for Science: Evidence from the American Finance Association

Renée Adams

Michelle Lowry

The reasons that can explain the very important issue of gender disparities in labor market outcomes are still quite nebulous. To remove such disparities we need first to understand the sources of women’s differential labor market outcomes. Differences in human capital have been found lacking in explaining observed differences. Recent developments in the literature point to three potential factors: gender differences in preferences, structure of work that can differentially impact men versus women, and bias. Research on women’s labor outcomes typically only address one explanation at a time, resulting in very limited conclusions. Most of the differential outcomes arise within occupations rather than between occupations, calling for an investigation focused on one occupation.

These limitations are addressed by Renée Adams and Michelle Lowry in their paper “What’s Good for Women Is Good for Science: Evidence from the American Finance Association.” In this work, the authors investigate the importance of multiple factors simultaneously in explaining why females’ and males’ work experiences differ and cast in a within-occupation analyses. To do so, the authors develop a survey with the American Finance Association (AFA) to assess the professional culture in finance academia.

Focusing on within-occupation effects, the authors find no observable gender differences of significance in preferences. This is a surprising result because conventional narratives have always referred to this dimension as a potential explanation. Any preferences that may exist cannot explain women’s worse career experiences. There is an important role that institutions and policy can play in addressing gender discrimination: addressing poor individual experiences, and improving culture, for example by encouraging unconscious bias training. These findings within the academic environment have implications for the broader finance industry.

Spotlight by Andrew Ellul
Photos courtesy of Renée Adams and Michelle Lowry

Forthcoming Paper

“Credit Environment and Small Business Dynamics: Evidence from Establishment-Level Data” by Chen Lin, Mingzhu Tai, and Wensi Xie

Forthcoming Paper

“How Do Investors and Firms React to a Large, Unexpected Currency Appreciation Shock?” by Matthias Efing, Rudiger Fahlenbrach, Christoph Herpfer, and Philipp Krueger