As luck would have it
Income inequality and the labour market in Britain and the US
Richard Blundell et al.
Journal of Public Economics, forthcoming
Abstract:
We study household income inequality in both Great Britain and the United States and the interplay between labour market earnings and the tax system. While both Britain and the US have witnessed secular increases in 90/10 male earnings inequality over the last three decades, this measure of inequality in net family income has declined in Britain while it has risen in the US. To better understand these comparisons, we examine the interaction between labour market earnings in the family, assortative mating, the tax and welfare-benefit system and household income inequality. We find that both countries have witnessed sizeable changes in employment which have primarily occurred on the extensive margin in the US and on the intensive margin in Britain. Increases in the generosity of the welfare system in Britain played a key role in equalizing net income growth across the wage distribution, whereas the relatively weak safety net available to non-workers in the US mean this growing group has seen particularly adverse developments in their net incomes.
Inequality of Educational Opportunity? Schools as Mediators of the Intergenerational Transmission of Income
Jesse Rothstein
NBER Working Paper, April 2018
Abstract:
Chetty et al. (2014b) show that children from low-income families achieve higher adult incomes, relative to those from higher income families, in some commuting zones (CZs) than in others. I investigate whether children’s educational outcomes help to explain the between-CZ differences. I find little evidence that the quality of schools is a key mechanism driving variation in intergenerational mobility. While CZs with stronger intergenerational income transmission have somewhat stronger transmission of parental income to children’s educational attainment and achievement, on average, neither can explain a large share of the between-CZ variation. Marriage patterns explain two-fifths of the variation in income transmission, human capital accumulation and returns to human capital each explain only one-ninth, and the remainder of the variation (about one-third) reflects differences in earnings between children from high- and low-income families that are not mediated by human capital. This points to job networks and the structure of local labor and marriage markets, rather than the education system, as likely factors influencing intergenerational economic mobility.
Why Has Economic Growth Slowed When Innovation Appears to be Accelerating?
Robert Gordon
NBER Working Paper, April 2018
Abstract:
Measured between quarters with identical unemployment rates, U. S. economic growth slowed by more than half from 3.2 percent per year during 1970-2006 to only 1.4 percent during 2006-16, and only half of this GDP growth slowdown is accounted for diminished productivity growth. The paper starts from the proposition that GDP growth matters, not just productivity growth, because slower GDP growth provides fewer resources to address the nation’s problems, including faltering education, aging infrastructure, and the looming shortfall in funding for Social Security and Medicare, and it also implies lower net investment and a reduced rate at which new capital can embody the latest technology. The paper documents the contribution to slower GDP growth of the separate components of demography -- fertility, mortality, life expectancy, and immigration. Particular emphasis is placed on the interaction between rising inequality and the slower secular rise of life expectancy in the U.S. compared to other developed countries, both in the form of a large gap in life expectancy between rich and poor, and the stagnation of life expectancy for the lowest income quintile. Further contributions to slowing growth are made by a decline in the population share of both legal and illegal immigration and a turnaround from rising to declining labor force participation. Rising inequality creates a gap between the growth of average real per-capita income relative to that of median real income, and alternative measures of the evolution of this gap are compared and assessed. Causes of declining productivity growth begin with the slowdown in the rate of increase of educational attainment resulting from the interplay of demand and supply factors, including the flattening of the college wage premium and the rising relative price of college education. Why did productivity growth decline after 2006 despite an increase in the rate at which new U.S. patents were issued in 2006-16 compared to earlier decades? Part of the slowdown is attributed to the maturity of the IT revolution, which also helps to explain the trajectory of the college wage premium. Aspects of the productivity growth slowdown include the declining productivity of research workers, diminishing returns to drug innovation, and the evolutionary rather than revolutionary impact of robots and artificial intelligence, which are replacing workers slowly and only in a minority of industrial sectors throughout the economy. Also considered are alternative explanations of slower productivity growth, including low investment and mismeasurement.
Growing Wealth Gaps in Education
Fabian Pfeffer
Demography, forthcoming
Abstract:
Prior research on trends in educational inequality has focused chiefly on changing gaps in educational attainment by family income or parental occupation. In contrast, this contribution provides the first assessment of trends in educational attainment by family wealth and suggests that we should be at least as concerned about growing wealth gaps in education. Despite overall growth in educational attainment and some signs of decreasing wealth gaps in high school attainment and college access, I find a large and rapidly increasing wealth gap in college attainment between cohorts born in the 1970s and 1980s, respectively. This growing wealth gap in higher educational attainment co-occurred with a rise in inequality in children’s wealth backgrounds, although the analyses also suggest that the latter does not fully account for the former. Nevertheless, the results reported here raise concerns about the distribution of educational opportunity among today’s children who grow up in a context of particularly extreme wealth inequality.
Organized Labor’s Check on Rising Economic Inequality in the U.S. States
Laura Bucci
State Politics & Policy Quarterly, June 2018, Pages 148-173
Abstract:
Recent demonstrations of growing economic inequality in the United States raise normative concerns about the political representation of all but the very wealthiest citizens. Building on existing cross-national work on the roles of unions in welfare states, I provide evidence that organized labor, as a political institution, limits unequal income distributions in the U.S. states. The states are useful to our understanding of labor’s influence on inequality as states differ in their acceptance of labor unions, base levels of inequality, political preferences, industries, and levels of development but are all nested within a single overarching national framework. Over the 39-year period examined, states where unions maintain more members remain more equal within the labor market and after redistribution via government transfer. These effects persist after accounting for state-level policy, demography, and economic conditions. However, states where union membership has the largest influence on inequality have also seen growing attempts to reduce unionization rates. Overall, I find that unions are still able to limit the growth of economic inequality in spite of declining levels of union membership.
Inequality rules: Resource distribution and the evolution of dominance- and prestige-based leadership
Richard Ronay, William Maddux & William von Hippel
Leadership Quarterly, forthcoming
Abstract:
Ballooning levels of societal inequality have led to a resurgence of interest in the economic causes and consequences of wealth disparity. What has drawn less attention in the scientific literature is how different levels of resource inequality influence what types of individuals emerge as leaders. In the current paper we take a distal approach to understanding the psychological consequences of inequality and the associated implications for leadership. We describe how the distribution of resources in contrasting animal and small-scale human societies incentivizes dominance-oriented versus prestige-oriented leadership strategies, and we use this framework to tease out a number of implications for modern organizational environments. In particular, we suggest that higher levels of inequality attract and favor dominance-oriented rather than prestige-oriented leaders, and that inequality incentivizes leaders to favor their own self-interest over the interests of the organizations they lead. We describe the features of modern organizations that might facilitate the emergence of dominance-oriented leadership and discuss the downstream consequences for organizations. Finally, we explore the contextual and cultural moderators of inequality's relationship with leader/follower dynamics.
(Anti-)egalitarianism differentially predicts empathy for members of advantaged versus disadvantaged groups
Brian Lucas & Nour Kteily
Journal of Personality and Social Psychology, May 2018, Pages 665-692
Abstract:
We explore the relationship between group-based egalitarianism and empathy for members of advantaged groups (e.g., corporate executives; state officials) versus disadvantaged groups (e.g., blue-collar workers; schoolteachers) subjected to harmful actions, events, or policies. Whereas previous research suggests that anti-egalitarians (vs. egalitarians) dispositionally exhibit less empathy for others, we propose that this relationship depends on the target’s position in the social hierarchy. We examined this question across eight studies (N = 3,154) conducted in the U.S. and the U.K., including online and in-person experiments and examining attitudinal and behavioral outcomes. We observed that (anti-)egalitarianism negatively predicted empathy for members of disadvantaged groups subjected to harmful situations, but positively predicted empathy for members of advantaged groups. This pattern held regardless of perceivers’ own membership in advantaged or disadvantaged groups (i.e., perceiver gender, race, or SES). (Anti-)egalitarianism’s differential effects on empathy for advantaged versus disadvantaged targets were attributable in part to differences in perceived degree of harm incurred (beyond roles for perceived value conflict and perceived deservingness): Egalitarians perceived the same action as more harmful than anti-egalitarians when it occurred to a disadvantaged target but less harmful than anti-egalitarians when it occurred to an advantaged target. We also explored how these patterns informed individuals’ downstream policy attitudes and policy-relevant behavior (e.g., willingness to sign a petition). Our findings enrich understanding of (anti-)egalitarianism by testing competing perspectives on the link between (anti-)egalitarianism and empathy, and by demonstrating when and why individuals’ preferences for social equality (vs. hierarchy) lead them to extend versus withhold empathy.
Genetic influence on social outcomes during and after the Soviet era in Estonia
Kaili Rimfeld et al.
Nature Human Behaviour, April 2018, Pages 269-275
Abstract:
The aetiology of individual differences in educational attainment and occupational status includes genetic as well as environmental factors and can change as societies change. The extent of genetic influence on these social outcomes can be viewed as an index of success in achieving meritocratic values of equality of opportunity by rewarding talent and hard work, which are to a large extent influenced by genetic factors, rather than rewarding environmentally driven privilege. To the extent that the end of the Soviet Union and the independence of Estonia led to an increase in meritocratic selection of individuals in education and occupation, genetic influence should be higher in the post-Soviet era than in the Soviet era. Here we confirmed this hypothesis: DNA differences (single-nucleotide polymorphisms) explained twice as much variance in educational attainment and occupational status in the post-Soviet era compared with the Soviet era in both polygenic score analyses and single-nucleotide polymorphism heritability analyses of 12,500 Estonians. Our results demonstrate a change in the extent of genetic influence in the same population following a massive and abrupt social change - in this case, the shift from a communist to a capitalist society.
Marital Patterns and Income Inequality
Arnaud Dupuy & Simon Weber
University of Chicago Working Paper, March 2018
Abstract:
We investigate the role of marital patterns on rising income inequality using a structural marriage matching model a la Choo and Siow (2006). This structural approach allows us to consider both the extensive and intensive margins of the marriage market, i.e. who remains single and who marries whom. We apply the model to US data from 1962 to 2017 and show that marital patterns can explain about 1/3 of the rise in income inequality as measured by the Gini coefficient. Although educational assortative mating has increased over the period, mostly driven by college graduates, the intensive margin has only played a minor role (5%), the extensive margin being the main driver of the contribution of marital patterns (95%).
Contextual and personal determinants of preferring success attributed to natural talent or striving
Christina Brown et al.
Journal of Experimental Social Psychology, forthcoming
Abstract:
Evidence to date has established a preference for successful individuals whose achievements are attributed to natural talent (“naturals”) rather than focused effort (“strivers”). Across six studies, we discovered a reversal of the bias depending on contextual and personal factors. Strivers, rather than naturals, are favored when evaluating ordinary people. This preference is particularly strong among perceivers who have experience in the performance domain, and it replicates across different domains and participant populations. Strivers are also preferred as cooperative partners and are expected to perform better on novel, unrelated tasks. The direction of the preference for naturals versus strivers can be traced to a combination of the perceiver's experience and the target's professional status. Specifically, a naturalness bias was only present among experienced perceivers evaluating professional targets. On the other hand, a more implicit form of the naturalness bias was observed in attributions made about the target's achievement, such that strivers were assumed to have natural talent more than naturals were assumed to have worked diligently.
Misperceptions of Relative Affluence and Support for International Redistribution
Gautam Nair
Journal of Politics, forthcoming
Abstract:
Against a backdrop of vast income disparities across countries, this article develops a theory of how misperceptions of individuals’ relative international income shape mass support for cross-national transfers in the developed world. It tests this theory using a real-stakes experiment implemented on a nationally representative survey in the United States. I find that participants underestimate their percentile rank in the global income distribution by 27 points on average and overestimate the global median income by a factor of 10. Respondents who were randomly assigned to information on the global income distribution supported higher spending on foreign aid and cuts in agricultural trade protections at larger rates. A behavioral measure validates these survey data - donations to charities abroad rise by 55% relative to the control group. These findings contribute to our understanding of subjective perceptions, preferences for cross-border redistribution, and the conditions under which information can shape opinion and behavior.
Explaining the Unexplained: Residual Wage Inequality, Manufacturing Decline, and Low‐Skilled Immigration
Eric Gould
Economic Journal, forthcoming
Abstract:
This article investigates whether the increasing “residual wage inequality” trend, which is responsible for most of the wage inequality phenomenon, is related to manufacturing decline and the influx of low‐skilled immigrants. The analysis exploits variation across locations in the United States, and shows that a shrinking manufacturing sector increases inequality. This effect strengthens with an influx of low‐skilled immigrants. Similar results are found for the increasing return to education and the decline in the employment rate. The evidence suggests that manufacturing decline is producing downward pressure on the relative wages of workers at the low end of the income distribution.
Income inequality and the growth of redistributive spending in the United States (US) states: Is there a link?
Tima Moldogaziev, James Monogan & Christopher Witko
Journal of Public Policy, June 2018, Pages 141-163
Abstract:
Prominent public policy models have hypothesised that rising income inequality will lead to more redistributive spending. Subsequent theoretical advancements and empirical research often failed to find a positive relationship between inequality and redistributive spending, however. Over the last few decades both income inequality and redistributive spending have been growing in the United States states. In this work, we consider whether temporal variation in inequality can explain variation in redistributive spending, while controlling for a number of factors that covary with redistributive spending in the states. In an analysis of data for 1976-2008, we find that higher levels of inequality are associated with greater redistributive spending, offering empirical evidence that fiscal policy at the state level responds to growing levels of income inequality. Considering the growing role of state governments in welfare provision during the past several decades, this finding is relevant for policy researchers and practitioners at all levels of government.
Inequity and Excellence in Academic Performance: Evidence From 27 Countries
Philip Parker et al.
American Educational Research Journal, forthcoming
Abstract:
Research suggests that a country does not need inequity to have high performance. However, such research has potentially suffered from confounders present in between-country comparative research (e.g., latent cultural differences). Likewise, relatively little consideration has been given to whether the situation may be different for high- or low-performing students. Using five cycles of the Programme for International Student Assessment (PISA) database, the current research explores within-country trajectories in achievement and inequality measures to test the hypothesis of an excellence/equity tradeoff in academic performance. We found negative relations between performance and inequality that are robust and of statistical and practical significance. Follow-up analysis suggests a focus on low and average performers may be critical to successful policy interventions.
Deciding Who Gets What, Fairly
Franklin Shaddy & Anuj Shah
Journal of Consumer Research, forthcoming
Abstract:
Goods and services are often allocated to those who spend the most resources. In many cases, this results in allocation to people who spend the most money. But people can use a variety of other resources to acquire things (e.g., time, effort, social capital). Why might some resources seem fairer to use than others? In this research, we show that people believe resources systematically differ according to how well they signal preferences (e.g., money spent seems like a worse signal of want or need than does time or effort spent) and that allocation policies seem fairer if they are based on resources that clearly signal preferences. We explore several factors that influence beliefs about preference signaling, and we explain how these intuitions shape support for business practices and public policies.