Wealth After the Great Recession: Who Lost, Who Recovered, and Why?

Awarded Scholars:
Fabian Pfeffer, University of Michigan
Robert Schoeni, University of Michigan
Project Date:
Feb 2012
Award Amount:
Project Programs:
The Social and Economic Effects of the Great Recession

This award will fund an investigation into the loss of wealth during the Great Recession.

According to the Federal Reserve, U.S. households lost approximately 25 percent of their aggregate wealth between the end of 2007 and the middle of 2009, when the Great Recession was officially declared at an end. Since then, about half of that lost wealth has been rebuilt, as equity markets have bounced back and households have increased savings and reduced debt. But the recovery has been far from uniform. Wealthier households, who generally hold a greater fraction of their wealth in financial assets, have benefitted from the stock market’s resiliency, but households nearer the middle of the wealth distribution, whose principal asset is the equity in their home, continue to suffer from depressed prices and illiquidity in the residential housing market.

Fabian Pfeffer, Sheldon Danziger, and Robert Schoeni (University of Michigan) propose to use Michigan’s Panel Study of Income Dynamics (PSID) to make a detailed study of these inequalities in the recovery of wealth in the wake of the Great Recession. Using the rich longitudinal, multi-generational data available in the PSID, they plan to track wealth changes across the wealth distribution during and after the recession, determine the characteristics of households that have been slowest to recover, and chart the inter-generational transfers of wealth within families that may have served to buffer the worst effects of the recession in families with available resources.

In the first part of their study, Pfeffer and his colleagues will analyze data from eight waves of the PSID beginning in 1999 and running through 2013, to track changes in net worth of households across the wealth distribution before, during, and after the Great Recession. The second part of the proposed study would examine wealth changes during and after the recession for families with different socio-economic characteristics. The last part of the study would take an innovative look at the way in which changes in wealth among kin-related households may have been correlated during and after the Great Recession. The PSID now contains over 7,500 households that are directly related to each other – either as parents and children, or as siblings. Pfeffer and his colleagues propose to exploit this feature of the PSID to examine whether the relationship between households is a significant predictor of the correlation between the changes in their wealth during and after the recession, net of the socio-economic characteristics, such as income level, occupation, and education, which related families may share.


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