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The College Wealth Divide: Education and Inequality in America, 1956-2016

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Abstract
Using new long-run microdata, this article studies wealth and income trends of households with a college degree (college households) and without a college degree (noncollege households) in the United States since 1956. We document the emergence of a substantial college wealth premium since the 1980s, which is considerably larger than the college income premium. Over the past four decades, the wealth of college households has tripled. By contrast, the wealth of noncollege households has barely grown in real terms over the same period. Part of the rising wealth gap can be traced back to systematic portfolio differences between college and noncollege households that give rise to different exposures to asset price changes. Noncollege households have lower exposure to the equity market and have profited much less from the recent surge in the stock market. We also discuss the importance of financial literacy and business ownership for the increase in wealth inequality between college and noncollege households.

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  • Alina K. Bartscher & Moritz Kuhn & Moritz Schularick, 2020. "The College Wealth Divide: Education and Inequality in America, 1956-2016," Review, Federal Reserve Bank of St. Louis, vol. 102(1), pages 19-49.
    • Handle: RePEc:fip:fedlrv:87423
    DOI: 10.20955/r.102.19-49
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    Cited by:

    1. Mariam Camarero & Gilles Dufrénot & Cecilio Tamarit, 2021. "How do inequalities affect the natural interest rate, and how do they impact monetary policy? Comparing Germany, Japan and the US," Working Papers halshs-03191667, HAL.
    2. Alina K. Bartscher & Moritz Kuhn & Moritz Schularick, 2020. "The College Wealth Divide Continues to Grow," Economic Synopses, Federal Reserve Bank of St. Louis, issue 1, January.
    3. Xia Zhou & Shaoyong Lai, 2023. "The mutual influence of knowledge and individual wealth growth," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 96(6), pages 1-22, June.
    4. Finer, David Andrew, 2022. "No Shock Waves through Wall Street? Market Responses to the Risk of Nuclear War," Working Papers 318, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.

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    More about this item

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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