There is much debate but little consensus about what causes economic inequality and a lack of mobility in the United States. Many studies have focused on the effects of individual and family characteristics on wealth, but few have analyzed the role of local conditions: the social and economic characteristics of the places where people live.

We took a closer look at these factors in a recent study and found that a family’s wealth accumulation is strongly related to both the education of the family head and the share of county residents who have at least a bachelor’s degree.

We examined wealth accumulation from 1989 to 1999 for families headed by people age 25 to 54. With data from a sample of 2,341 family heads, we estimated the family’s change in wealth as related to characteristics of the family head, the family, and the county of residence—including residents’ educational attainment—in 1989. 

The lighter-shaded portions of the map below are areas of lower educational attainment, as measured by each county’s percentage of college graduates among adults 25 years and older during 2008-2012: the same variable used in the study, updated to reflect more recent data. These areas are concentrated in the mid-Atlantic, lower Midwest, and Southeast regions, as well as portions of the Southwest. 

Family heads living in these areas face lower prospects for asset accumulation during their pre-retirement years, all other things equal (including the family’s income). Specifically, residents of these areas derive less of the boost to asset growth that comes from living in a community where college graduates are more prevalent. A full accounting of the benefits of better-educated family heads must include the direct effects to the family itself and a significant externality: the greater likelihood of wealth accumulation among other families living in the same local area.

What are the policy implications of the study’s results and the map’s geographic pattern? This new evidence indicates that, among the policies for promoting economic mobility, increasing public investments in postsecondary education at all levels of government should be considered. These efforts should be concentrated, whenever possible, in areas of the country where adult educational attainment is lagging. 

Our findings strengthen the case for President Obama’s recent proposals to make college education more affordable for low-income families. Investments in postsecondary education will yield economic returns not only for college graduates and their families, but also for others in their communities.