Life insurance was historically important to retirement savings and intergenerational wealth accumulation. Black households were especially likely relative to white ones to hold these low-risk, low-return savings/investment vehicles. Policy-holding incentives, however, changed dramatically for the worse—disproportionately so for Black households—upon the advent of two New-Deal-era policies: Social Security and the reformulation of key tenets of macroeconomic policy by the Federal Reserve. What were the consequences for persistent racial disparities?
This study asks: what are the distributional impacts of retirement and macroeconomic policies through their interaction with long-standing racialized patterns in insurance demand? To examine this, I compare returns earned by individuals investing in ordinary life policies to those instead relying on SSA in the postwar period. Specifically, I use a differences-in-differences-style framework to test the impact of long-standing race-specific differences in county-level insurance demand, in interaction with SSA and inflationary Fed policies (both which changed old-age savings incentives race-specifically), on race-specific portfolio composition/returns and wealth in old age.
I thereby test for the racially disparate impact of facially neutral policy, and help advance our understanding of 1) the long-run consequences of racialized patterns in retirement savings and 2) the role of policy in today’s racial wealth gaps.