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Chapter 10 Immigrants’ Access to Financial Services and Asset Accumulation Una Okonkwo Osili and Anna L. Paulson M ore than 191 million people live outside their country of birth, and about 20 percent of these emigrants live in the United States (United Nations 2005). Today at least one in nine U.S. residents, or 35 million people, were born abroad, and nearly one in five U.S. schoolchildren have an immigrant parent (Capps et al. 2004). Immigrants make up a disproportionate share of lowand moderate-income U.S. residents. Among individuals with below-median income, one in six were born abroad. Since 1990, the growth in the immigrant population has been fastest outside of traditional immigrant-receiving regions (Singer 2004). As a result, immigrants are now an important component of the population of virtually every U.S. community . One characteristic of healthy communities is broad participation in financial markets. Immigrants, however, are much less likely than the native-born to participate in a wide variety of financial markets (see figure 10.1 and table 10.1). Not unrelated to this is the substantial wealth gap between immigrants and the native-born. The median immigrant family has wealth (real and financial) of $8,300 per person, just 23 percent that of the median family born in the United States (see table 10.1). Immigrants are much more likely to have zero wealth and are also less likely to have accumulated higher levels of wealth. The gap in financial wealth is even more striking. The median immigrant family has just 17 percent of the financial wealth of the median native-born family. In the tradition of Melvin Oliver and Thomas Shapiro (1995), we can think of wealth as a summary of past experiences that translate into today’s economic opportunity . Together with their labor market experiences and family background, immigrants bring perspectives acquired in their country of origin to the United States. In addition to offering a summary of the past, wealth is an important measure of the economic prospects of future generations. By studying the wealth of U.S. immigrants , we can gain insights into how past experiences have shaped their current circumstances , and we can also gauge whether the economic adaptation of current immigrants and their children will keep pace with their demographic growth. / 285 This chapter explores two broad areas that influence immigrants’ wealth accumulation and particularly their decisions to participate in various financial markets: characteristics that influence the behavior of both immigrants and the native-born, like education and marital status, and characteristics that are unique to immigrants, such as legal status and time in the United States. In addition, we discuss potential explanations for the persistently low financial market participation of immigrants, including the desire to purchase a home, country-of-origin experiences, remittances, wealth held abroad, return migration intentions, and supply-side factors, like the location of financial institutions and the characteristics of financial products. The analysis relies primarily on data from the 2001 Survey of Income and Program Participation (SIPP). Consistent with many models of savings behavior, we find that socioeconomic and demographic characteristics like age, education, family structure, ethnicity, and income play an important role in immigrant as well as native-born choices regarding financial services. These characteristics, however, are only part of the Insufficient Funds 286 / Source: Authors’ calculations based on Survey of Income and Program Participation. Notes: For each observation in the figure, a weighted regression is performed using 80 percent (bandwidth = 0.8) of the data around that point. The data are weighted using a tri-cube weighting procedure that puts more weight on the points closest to the observation in question. The weighted regression results are used to produce a predicted value for each observation. Checking Account Savings Account IRA and/or Keogh Account Age As of Last Birthday Graphs by Immigrant Status Stocks and/or Mutual Funds 0 .2 .4 .6 .8 20 40 60 80 20 40 60 80 Natives Immigrants FIGURE 10.1 / Lowess Estimates of the Probability of Ownership of Assets Versus Age TABLE 10.1 / Income and Wealth of Immigrant and Native-Born Households Income Below All 40th Percentile Whites Blacks Hispanics Asians Native Immigrant Native Immigrant Native Immigrant Native Immigrant Native Immigrant Native Immigrant Income and wealth (in thousands of dollars) Median monthly $1.59 $1.10 $0.82 $0.56 $1.75 $1.59 $1.06 $1.05 $1.02 $0.78 $2.00 $1.49 household income Median household wealth 36.10...


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