Balances
Greed, Envy, and Admiration: The Distinct Nature of Public Opinion about Redistribution from the Rich
Kristina Jessen Hansen
American Political Science Review, forthcoming
Abstract:
Research on public opinion about economic redistribution has made important progress by incorporating the psychological microfoundation that shapes support for redistribution to the poor. However, one piece is missing: the microfoundation shaping support for redistribution from the rich. I provide a novel theory about this facet of redistributive attitudes and how it is distinct. Observational data from three nationally representative samples in two different welfare systems and an experiment show that attitudes about taking from the rich are mainly driven by perceptions of their prosociality -- whether they are greedy or generous. This contrasts with public opinion about giving to the poor that is mainly driven by perceptions of the efforts of poor people. Furthermore, while compassion shapes attitudes about giving to the poor, the emotions of admiration and envy shape attitudes about taking from the rich. These findings have important theoretical and empirical implications for public opinion about economic redistribution.
Does Homeownership Reduce Wealth Disparities for Low-Income and Minority Households?
Ashleigh Eldemire, Kimberly Luchtenberg & Matthew Wynter
Review of Corporate Finance Studies, August 2022, Pages 465–510
Abstract:
We use the U.S. Department of Housing and Urban Development’s Housing Choice Voucher program as a setting to evaluate the interaction of homeownership and race on the wealth accumulation of low-income households. Using a within-treatment difference-in-differences framework, we establish that low-income households that receive assistance in owning a home experience increased wealth accumulation relative to their tenure as renters. These wealth gains are not present among low-income minority households. Our findings provide evidence that homeownership is a driver of wealth formation for low-income households and that homeownership does not inherently reduce racial disparities in wealth.
Elite recruitment in US finance: How university prestige is used to secure top executive positions
Felix Bühlmann et al.
British Journal of Sociology, forthcoming
Abstract:
Status attainment theories assert that individuals are recruited based on the length and functional background of their training. Elite theories assume that top managers often deviate from these socially acceptable mechanisms of status attainment to entrench their advantage. In this study, focusing on the US financial sector, we investigate whether educational institution prestige — rather than the subject or length of education — increasingly influences appointments to top executive positions. We analyze 1987 US top executive managers affiliated with 147 firms from both financial and non-financial sectors in 2005 and 2018. Our study demonstrates that alumni of prestigious universities have a strikingly higher likelihood of attaining a top executive role in finance than in non-finance. Within finance it is no longer investment banking, but private equity, that contains the highest proportion of elite university graduates. Our findings suggest that notwithstanding the major power shifts between finance and non-finance — and also within the finance sector — elite groups still dominate the most symbolically valued education, and as a result, top managerial positions.
Social capital I: Measurement and associations with economic mobility
Raj Chetty et al.
Nature, 4 August 2022, Pages 108-121
Abstract:
Social capital — the strength of an individual’s social network and community — has been identified as a potential determinant of outcomes ranging from education to health. However, efforts to understand what types of social capital matter for these outcomes have been hindered by a lack of social network data. Here, in the first of a pair of papers, we use data on 21 billion friendships from Facebook to study social capital. We measure and analyse three types of social capital by ZIP (postal) code in the United States: (1) connectedness between different types of people, such as those with low versus high socioeconomic status (SES); (2) social cohesion, such as the extent of cliques in friendship networks; and (3) civic engagement, such as rates of volunteering. These measures vary substantially across areas, but are not highly correlated with each other. We demonstrate the importance of distinguishing these forms of social capital by analysing their associations with economic mobility across areas. The share of high-SES friends among individuals with low SES — which we term economic connectedness — is among the strongest predictors of upward income mobility identified to date. Other social capital measures are not strongly associated with economic mobility. If children with low-SES parents were to grow up in counties with economic connectedness comparable to that of the average child with high-SES parents, their incomes in adulthood would increase by 20% on average. Differences in economic connectedness can explain well-known relationships between upward income mobility and racial segregation, poverty rates, and inequality. To support further research and policy interventions, we publicly release privacy-protected statistics on social capital by ZIP code at https://www.socialcapital.org.
Social capital II: Determinants of economic connectedness
Raj Chetty et al.
Nature, 4 August 2022, Pages 122-134
Abstract:
Low levels of social interaction across class lines have generated widespread concern and are associated with worse outcomes, such as lower rates of upward income mobility. Here we analyse the determinants of cross-class interaction using data from Facebook, building on the analysis in our companion paper. We show that about half of the social disconnection across socioeconomic lines — measured as the difference in the share of high-socioeconomic status (SES) friends between people with low and high SES — is explained by differences in exposure to people with high SES in groups such as schools and religious organizations. The other half is explained by friending bias — the tendency for people with low SES to befriend people with high SES at lower rates even conditional on exposure. Friending bias is shaped by the structure of the groups in which people interact. For example, friending bias is higher in larger and more diverse groups and lower in religious organizations than in schools and workplaces. Distinguishing exposure from friending bias is helpful for identifying interventions to increase cross-SES friendships (economic connectedness). Using fluctuations in the share of students with high SES across high school cohorts, we show that increases in high-SES exposure lead low-SES people to form more friendships with high-SES people in schools that exhibit low levels of friending bias. Thus, socioeconomic integration can increase economic connectedness in communities in which friending bias is low. By contrast, when friending bias is high, increasing cross-SES interactions among existing members may be necessary to increase economic connectedness. To support such efforts, we release privacy-protected statistics on economic connectedness, exposure and friending bias for each ZIP (postal) code, high school and college in the United States at https://www.socialcapital.org.
A Meritocratic Origin of Egalitarian Behaviour
Alexander Cappelen et al.
Economic Journal, August 2022, Pages 2101–2117
Abstract:
We report from a study of how uncertainty about whether a given inequality reflects performance or luck shapes distributive behaviour. We show theoretically that the reaction to uncertainty depends on how people trade-off the probability of making a mistake when redistributing, and the size of this mistake. We show experimentally that uncertainty causes a strong egalitarian pull among a majority of meritocratic individuals. The theoretical framework and the experimental results are supported in general population surveys in the United States and Norway. Our findings suggest that how people handle uncertainty about the source of inequality may be of great importance for understanding distributive conflicts in society.
Relative power and interpersonal trust
Christilene du Plessis et al.
Journal of Personality and Social Psychology, forthcoming
Abstract:
Because trust is essential in the development and maintenance of well-functioning relationships, scholars across numerous scientific disciplines have sought to determine what causes people to trust others. Power dynamics are known to predict trust, but research on the relationship between power and trust is inconclusive, with mixed results and without systematic consideration of how the relative power distribution within dyadic relationships may influence trust in those relationships. Building on interdependence theory, we propose that both individuals in an unequal-power dyad trust each other less than individuals in an equal-power dyad because unequal-power dyads heighten the perception of a conflict of interest. We demonstrate the effect of relative power on interpersonal trust across eight main studies and 16 supplemental studies (including 12 preregistered studies; total N = 10,531), and we test the mechanism with measurement-of-mediation and moderation-of-process approaches. We confirm that the effect of power on interpersonal trust occurs only with relative power (an interpersonal manifestation of power), not with felt power (an intrapersonal manifestation). Finally, we show that the effect of relative power on interpersonal trust via conflict of interest is attenuated in the presence of intergroup competition, a theoretically motivated moderator with practical implications. Overall, the present research clarifies the relationship between relative power and interpersonal trust, suggests that high- and low-power individuals may share similar psychological experiences within the context of unequal-power relationships, and highlights the importance of considering the context in which power dynamics occur.
The globalizability of temporal discounting
Kai Ruggeri et al.
Nature Human Behaviour, forthcoming
Abstract:
Economic inequality is associated with preferences for smaller, immediate gains over larger, delayed ones. Such temporal discounting may feed into rising global inequality, yet it is unclear whether it is a function of choice preferences or norms, or rather the absence of sufficient resources for immediate needs. It is also not clear whether these reflect true differences in choice patterns between income groups. We tested temporal discounting and five intertemporal choice anomalies using local currencies and value standards in 61 countries (N = 13,629). Across a diverse sample, we found consistent, robust rates of choice anomalies. Lower-income groups were not significantly different, but economic inequality and broader financial circumstances were clearly correlated with population choice patterns.
Real-Time Inequality
Thomas Blanchet, Emmanuel Saez & Gabriel Zucman
NBER Working Paper, July 2022
Abstract:
This paper constructs high-frequency and timely income distributions for the United States. We develop a methodology to combine the information contained in high-frequency public data sources — including monthly household and employment surveys, quarterly censuses of employment and wages, and monthly and quarterly national accounts statistics — in a unified framework. This allows us to estimate economic growth by income groups, race, and gender consistent with quarterly releases of macroeconomic growth, and to track the distributional impacts of government policies during and in the aftermath of recessions in real time. We test and successfully validate our methodology by implementing it retrospectively back to 1976. Analyzing the Covid-19 pandemic, we find that all income groups recovered their pre-crisis pretax income level within 20 months of the beginning of the recession. Although the recovery was primarily driven by jobs rather than wage growth, wages experienced significant gains at the bottom of the distribution, highlighting the equalizing effects of tight labor markets. After accounting for taxes and cash transfers, real disposable income for the bottom 50% was 20% higher in 2021 than in 2019, but fell in the first half of 2022 as the expansion of the welfare state during the pandemic was rolled back. All estimates are available at https://realtimeinequality.org and are updated with each quarterly release of the national accounts, within a few hours.
Is there wealth stability across generations in the U.S.? Evidence from panel study, 1984–2017
Jermaine Toney
Contemporary Economic Policy, forthcoming
Abstract:
The net wealth accumulation of grandparents appears to be strongly determinative of the net wealth holdings of their adult grandchildren. While these general features are understood, few details are known about the persistence of wealth components that determine overall portfolio outcomes and their variance. I find that grandparental linkages in household portfolio components (risky assets, safe assets, non-financial assets) are strongly positively correlated with the asset components of the current generation. Meanwhile, I find that there is persistence in intergroup disparities in wealth components, accounting for the intergenerational transfers of wealth from grandparents and parents. My decompositions of net wealth into risky, safe, and non-financial assets illuminate different policy implications connected to total wealth accumulation and wealth inequality across younger households.
Parental Time Investment and Intergenerational Mobility
Minchul Yum
International Economic Review, forthcoming
Abstract:
This article constructs an overlapping generations general equilibrium model to explore the extent to which heterogeneity in time investment shapes intergenerational mobility of lifetime income. The calibrated model successfully accounts for untargeted distributional aspects of income mobility. Counterfactual exercises show that removing heterogeneity in parental time investment reduces intergenerational persistence by around 7–8% for early childhood but only marginally in later childhood. Policy experiments find that an asset-tested subsidy for parental monetary investments in early childhood can raise intergenerational mobility in a cost-effective way, though it reduces mobility substantially if given to parents with older school-aged children.