Against the odds: Unveiling the racial dynamics of financial resilience in post-apartheid South Africa

Abstract

Recent economic shocks have intensified financial distress and inequality, prompting research into the factors contributing to financial resilience. Previous studies have primarily employed unidimensional measures of financial resilience, neglecting the role of race. This paper addresses knowledge gaps by exploring how race influences financial resilience. Using data from the South African National Income Dynamic Study, this paper constructs a multidimensional financial resilience index, examines the relationship between race and financial resilience, and identifies potential mediating variables. The results indicate that approximately 52% of South Africans are financially resilient. Empirically, propensity score matching shows that Non-Whites exhibit approximately 11% lower financial resilience levels than whites. Additionally, the Oaxaca–Blinder decomposition proves that discrimination accounts for approximately 3.7% of this disparity. Financial resilience among Non-Whites would have increased by 1.5% if they had similar characteristics to Whites. Furthermore, mental health disorders and low trust mediate the relationship between race and financial resilience.