Wealth in the extended family: An American Dilemma

This paper argues that researchers may be misgauging family resources by focusing narrowly on the nuclear family when measuring these resources. While social scientists have long been interested in the ways that families' material resources affect their ability to provide for their offspring, the traditional measures of family resources have emphasized parents' income and parents' wealth, although the interest in the latter is relatively new (Conley 2009 [1999]; Haveman et al., 2001; Oliver and Shapiro, 2006 [1995]). This paper attempts to shift the focus to the extended family, and it uses data from the Panel Study of Income Dynamics (PSID) and the Child Development Supplement (CDS) to paint a portrait of the volume of wealth that is available in the grandparent generation of a child's family tree. After theorizing about the potential ways that grandparent wealth can affect children's life chances, the research shows that there are substantial differences in extended-family wealth by race. The Black/White wealth ratio is on the order of 0.11 in the grandparent generation at the median, which indicates that the typical Black child has grandparents with only about eleven cents of wealth for every dollar that the grandparents of the typical White child possess. Some implications of this wealth gap for children and society are discussed.