The Economic Impact of Racial Inequality and Reparations

Most experts agree that, historically, the U.S. economy benefitted tremendously at the expense of people of color. However, in recent years, a new conversation has emerged about whether present-day racial inequality is actually harmful for the economy as a whole. In a forthcoming paper, we review the literature focusing on the impact of racial inequality on the U.S. economy and offer a critical commentary.

We then attempt to fill a gap in the literature by endogenizing key variables including income, wealth, and education in a simulation on the theoretical impact of closing each racial disparity on the economy as a whole. We demonstrate how the strength of the dynamic interplay between these variables has important implications relevant to the persistence of the effects of a reparations policy.