Divergent
Nicholas Carnes & Meredith Sadin
Journal of Politics, forthcoming
Abstract:
Politicians often highlight how hard their families had it when they were growing up, presumably in the hopes that voters will see them as more supportive of policies that benefit middle- and working-class Americans. What do voters actually infer from how candidates were raised? And what should they infer? We use a set of candidate evaluation experiments (and an external validity test drawing on actual congressional election returns) to study how Americans perceive politicians raised in more and less affluent families. We then compare these perceptions to data on how lawmakers brought up in different classes actually behave in office. Although voters often infer that politicians from less privileged families are more economically progressive, these lawmakers don’t actually stand out on standard measures of legislative voting. The “mill worker’s son” heuristic appears to be a misleading shortcut, a cue that leads voters to make faulty inferences ab!
out candidates’ political priorities.
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Social Status and Biological Dysregulation: The “Status Syndrome” and Allostatic Load
Melvin Seeman et al.
Social Science & Medicine, October 2014, Pages 143-151
Abstract:
Data from a national sample of 1,255 adults who were part of the MIDUS (Mid-life in the U.S.) follow-up study and agreed to participate in a clinic-based in-depth assessment of their health status were used to test the hypothesis that, quite apart from income or educational status, perceptions of lower achieved rank relative to others and of relative inequality in key life domains would be associated with greater evidence of biological health risks (i.e., higher allostatic load). Results indicate that over a variety of status indices (including, for example, the person’s sense of control, placement in the community rank hierarchy, perception of inequality in the workplace) a syndrome of perceived relative deprivation is associated with higher levels of biological dysregulation. The evidence is interpreted in light of the well-established associations between lower socioeconomic status and various clinically identified health morbidities. The present evidence serves, i!
n effect, both as a part of the explanation of how socio-economic disparities produce downstream morbidity, and as an early warning system regarding the ultimate health effects of currently increasing status inequalities.
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A Social Rank Explanation of How Money Influences Health
Michael Daly, Christopher Boyce & Alex Wood
Health Psychology, forthcoming
Objective: Financial resources are a potent determinant of health, yet it remains unclear why this is the case. We aimed to identify whether the frequently observed association between absolute levels of monetary resources and health may occur because money acts an indirect proxy for a person’s social rank.
Method: To address this question we examined over 230,000 observations on 40,400 adults drawn from two representative national panel studies; the British Household Panel Survey and the English Longitudinal Study of Ageing. We identified each person’s absolute income/wealth and their objective ranked position of income/wealth within a social reference-group. Absolute and rank income/wealth variables were then used to predict a series of self-reported and objectively recorded health outcomes in cross-sectional and longitudinal analyses.
Results: As anticipated, those with higher levels of absolute income/wealth were found to have better health than others, after adjustment for age, gender, education, marital status, and labor force status. When evaluated simultaneously the ranked position of income/wealth but not absolute income/wealth predicted all health outcomes examined including: objective measures of allostatic load and obesity, the presence of long-standing illness, and ratings of health, physical functioning, role limitations, and pain. The health benefits of high rank were consistent in cross-sectional and longitudinal analyses and did not depend on the reference-group used to rank participants.
Conclusions: This is the first study to demonstrate that social position rather than material conditions may explain the impact of money on human health.
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The inequality trap. A comparative analysis of social spending between 1880 and 1930
Sergio Espuelas
Economic History Review, forthcoming
Abstract:
It is often assumed that the fight against inequality played an important role in the rise of the welfare state. However, using social transfers as an indicator of redistribution and three alternative proxies for inequality - the top income shares, the ratio of the GDP per capita to the unskilled wage, and the share of non-family farms - this article shows that inequality did not favour the development of social policy between 1880 and 1930. On the contrary, social policy developed more easily in countries that were previously more egalitarian, suggesting that unequal societies were in a sort of inequality trap, where inequality itself was an obstacle to redistribution.
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How Responsive Is Investment in Schooling to Changes in Redistributive Policies and in Returns?
Ran Abramitzky & Victor Lavy
Econometrica, July 2014, Pages 1241-1272
Abstract:
This paper uses an unusual pay reform to test the responsiveness of investment in schooling to changes in redistribution schemes that increase the rate of return to education. We exploit an episode where different Israeli kibbutzim shifted from equal sharing to productivity-based wages in different years and find that students in kibbutzim that reformed earlier invested more in high school education and, in the long run, also in post-secondary schooling. We further show that the effect is mainly driven by students in kibbutzim that reformed to a larger degree. Our findings support the prediction that education is highly responsive to changes in the redistribution policy.
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Catching Up is Hard to Do: Undergraduate Prestige, Elite Graduate Programs, and the Earnings Premium
Joni Hersch
Vanderbilt University Working Paper, July 2014
Abstract:
Income disparities arise not only from differences in the level of education but also from differences in status associated with an individual’s degree-granting college or university. While higher ability among those who graduate from elite undergraduate institutions may account for much of the earnings premium associated with elite education, ability should be largely equalized among those who graduate from similarly selective graduate programs. Few graduates of nonselective institutions earn post-baccalaureate degrees from elite institutions, and even when they do, undergraduate institutional prestige continues to influence earnings overall and among those with law, medical, graduate business and doctoral degrees.
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Lincoln Quillian
Social Problems, August 2014, Pages 402-426
Abstract:
This article examines the effects of residential segregation on the basis of poverty status and race for high school and college completion. Segregation effects are estimated by contrasting educational outcomes among persons raised in metropolitan areas with varying levels of segregation. This metropolitan-level approach provides two advantages in evaluating segregation effects over neighborhood effects studies: it incorporates effects of residential segregation outside of the affected individuals' neighborhoods of residence and it allows evaluation of gains and losses across groups from segregation. Data are drawn from the Panel Study of Income Dynamics and the decennial censuses. Poor-nonpoor segregation is associated with lower rates of high school graduation among adolescents from poor backgrounds, but has no effect on rates of graduation for students from nonpoor backgrounds. Black-white segregation is associated with lower rates of high school graduation and college gr!
aduation for black students, but has no effect on graduation rates for white students. Use of proximity-adjusted segregation measures or instrumental variable estimation gives similar results. The results suggest that residential segregation harms the educational attainment of disadvantaged groups without increasing the educational attainment of advantaged groups.
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Relative Income and Indebtedness: Evidence from Panel Data
Michael Carr & Arjun Jayadev
Review of Income and Wealth, forthcoming
Abstract:
We examine patterns of indebtedness in the Panel Study of Income Dynamics, focusing on the period surrounding the housing bubble and its aftermath (i.e., 1999-2009). Leverage increased across households, but most quickly among lower income households during this period. We find additionally that leverage grew faster for households with lower relative income compared to other households in similar demographic groups or within a state controlling for own income. Together, these findings provide evidence for the thesis that the rising indebtedness of households in the U.S. is related to high levels of inequality, and that “Veblen effects,” whereby relative income matters for individual well-being and decisions, may contribute to rising household indebtedness.
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Jessica McCrory Calarco
American Sociological Review, forthcoming
Abstract:
Scholars typically view class socialization as an implicit process. This study instead shows how parents actively transmit class-based cultures to children and how these lessons reproduce inequalities. Through observations and interviews with children, parents, and teachers, I found that middle- and working-class parents expressed contrasting beliefs about appropriate classroom behavior, beliefs that shaped parents’ cultural coaching efforts. These efforts led children to activate class-based problem-solving strategies, which generated stratified profits at school. By showing how these processes vary along social class lines, this study reveals a key source of children’s class-based behaviors and highlights the efforts by which parents and children together reproduce inequalities.
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Philippe Belley, Marc Frenette & Lance Lochner
Canadian Journal of Economics, May 2014, Pages 664-696
Abstract:
We examine the extent to which tuition and needs‐based aid policies explain important differences in the relationship between family income and post‐secondary attendance relationships between Canada and the U.S. Using data from recent cohorts, we estimate substantially smaller attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, cognitive achievement, and local‐residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low‐income youth than are Canadian policies. Equalizing these policies across Canada and the U.S. would likely lead to a greater difference in income‐attendance gradients.
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Intergenerational Mobility and Subjective Well-being - Evidence from the General Social Survey
Boris Nikolaev & Ainslee Burns
Journal of Behavioral and Experimental Economics, forthcoming
Abstract:
We investigate the relationship between intergenerational socio-economic mobility and subjective well-being (SWB) using data from the General Social Survey (GSS). We look at three different measures of intergenerational mobility - social, educational, and income mobility. We find that downward mobility with respect to all three measures has a negative effect on the self-reported level of happiness and subjective health while upward mobility is associated with positive outcomes in subjective well-being. The positive and negative effect of social and educational mobility, however, is entirely through the income and health channels while income mobility has an impact on subjective well-being even after controlling for the current level of income and health. We further find that the effect of income mobility on subjective well-being peaks between the ages of 35-45 years and then slowly dissipates. Finally, the negative effect of downward mobility on subjective well-being is much!
stronger than the positive effect of upward mobility. This is consistent with the decision theory of loss aversion according to which the experienced disutility from loses outweighs the utility from acquiring proportionate gains. We do not find evidence for loss aversion when it comes to social and educational mobility.
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Inequality and Relative Ability Beliefs
Jeffrey Butler
Economic Journal, forthcoming
Abstract:
I present experimental evidence for a novel mechanism yielding inequality persistence. Just World Beliefs research suggests that individuals believe they merit unequal treatment they experience. Merit depends on ability and effort so that disadvantage (advantage) may undermine (bolster) confidence in own relative ability. Because decisions determining economic success rely on such beliefs (e.g., competitiveness), inequality may self-perpetuate. In multiple experiments I randomly assign unequal pay for an identical task where performance depends on cognitive ability. I find that pay level consistently and substantially affects beliefs but not performance. Finally, I show that among males high pay increases competitiveness by 33%.
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The Hierarchy Enforcement Hypothesis of Environmental Exploitation: A Social Dominance Perspective
Taciano Milfont & Chris Sibley
Journal of Experimental Social Psychology, November 2014, Pages 188-193
Abstract:
Social Dominance Orientation (SDO) predicts support for unsustainable environmental exploitation, but the mechanism driving this effect remains unclear. Here we propose and test a novel Hierarchy Enforcement Hypothesis of Environmental Exploitation. Two experiments analysed using Bayesian moderated regression showed that SDO predicted support for a new mining operation expected to generate further profits to high-status groups in society, but not when profits were expected to equally benefit all members of the community. SDO predicts environmental exploitation to the extent that doing so helps sustain and widen the gap between dominant and disadvantaged groups through the disproportionate allocation of resources. This research identifies a dominance motive that may explain why some people support environmental exploitation more than others.
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The Economics of Human Development and Social Mobility
James Heckman & Stefano Mosso
Annual Review of Economics, 2014, Pages 689-733
Abstract:
This article distills and extends recent research on the economics of human development and social mobility. It summarizes the evidence from diverse literatures on the importance of early life conditions in shaping multiple life skills and the evidence on critical and sensitive investment periods for shaping different skills. It presents economic models that rationalize the evidence and unify the treatment effect and family influence literatures. The evidence on the empirical and policy importance of credit constraints in forming skills is examined. There is little support for the claim that untargeted income transfer policies to poor families significantly boost child outcomes. Mentoring, parenting, and attachment are essential features of successful families and interventions that shape skills at all stages of childhood. The next wave of family studies will better capture the active role of the emerging autonomous child in learning and responding to the actions of parents,!
mentors, and teachers.
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Daniel Bennett & Richard Vedder
Social Philosophy & Policy, forthcoming
Abstract:
Public policy designed to promote greater college enrollment rates has often been justified as a means to reduce income inequalities, yet there is very little evidence that higher college attainment is associated with less inequality. Economic theory at best suggests that the relationship between college attainment and inequality is ambiguous. An overview of some of the unintended consequences of public policies designed to promote greater enrollment is described. One such consequence is that the growth in college completion, which is at least partially attributable to public policy, may have actually contributed to rising income inequality. We hypothesize the existence of a U-shaped relationship between college attainment and income inequality, and using panel data for the 50 U.S. states over the period 1970-2004 provide empirical evidence in support of the curve. Prior to the mid 1990’s, increases in attainment were associated with less inequality for most states. R!
apid growth in attainment since then has moved most states to the right of the inflection point such that attainment gains are associated with more inequality in most states.
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Wealth transfer taxation: An empirical investigation
Paola Profeta, Simona Scabrosetti & Stanley Winer
International Tax and Public Finance, August 2014, Pages 720-767
Abstract:
We present an empirical model of wealth transfer taxation in the revenue systems of the G7 countries - Canada, France, Germany, Italy, Japan, the UK, and the US - over the period from 1965 to 2009. Our model emphasizes the influences of population aging and of the stock of household wealth in an explanation of the past and likely future of this tax source. Simulations with the model using U.N. demographic projections and projections of household wealth suggest that even in France and Germany where reliance on wealth transfer taxation has been increasing for part of the period studied, wealth transfer taxes can be expected to wither away as population aging deepens over the next two decades. Our results indicate that recent tax designs that rely upon the taxation of wealth transfers to preserve equity in the face of declining taxation of capital incomes may be, in this respect, politically infeasible for the foreseeable future. We conclude by using the case of wealth transfer!
taxation to raise the general question of the extent to which the consistency of a proposed reform with expected political equilibria ought to play a role in the design of a normative policy blueprint.
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The Inequality Deflator: Interpersonal Comparisons without a Social Welfare Function
Nathaniel Hendren
NBER Working Paper, July 2014
Abstract:
This paper develops a tractable method for resolving the equity-efficiency tradeoff that modifies the Kaldor-Hicks compensation principle to account for the distortionary cost of redistribution. Weighting measures of individual surplus by the inequality deflator corresponds to searching for local Pareto improvements by making transfers through the income tax schedule. Empirical evidence consistently suggests redistribution from rich to poor is more costly than redistribution from poor to rich. As a result, the inequality deflator weights surplus accruing to the poor more so than to the rich. Regardless of one's own social preferences, surplus to the poor can hypothetically be turned into more surplus to everyone through reductions in distortionary taxation. I estimate the deflator using existing estimates of the response to taxation, combined with a new estimation of the joint distribution of taxable income and marginal tax rates. I show adjusting for increased income inequa!
lity lowers the rate of U.S. economic growth since 1980 by roughly 15-20%, implying a social cost of increased income inequality in the U.S. of roughly $400 billion. Adjusting for differences in income inequality across countries, the U.S. is poorer than countries like Austria and the Netherlands, despite having higher national income per capita. I conclude by providing an empirical framework for characterizing the existence of local Pareto improvements from government policy changes.
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Financial Globalization, Inequality, and the Rising Public Debt
Marina Azzimonti, Eva de Francisco & Vincenzo Quadrini
American Economic Review, August 2014, Pages 2267-2302
Abstract:
During the last three decades government debt has increased in most developed countries. During the same period we have also observed a significant liberalization of international
financial markets. We propose a multi-country model with incomplete markets and show that governments may choose higher levels of debt when financial markets become internationally integrated. We also show that public debt increases with the volatility of uninsurable income (idiosyncratic risk). To the extent that the increase in income inequality observed in some industrialized countries has been associated with higher idiosyncratic risk, the paper suggests another potential mechanism for the rise in public debt.
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Inequality, Labor Market Segmentation, and Preferences for Redistribution
James Alt & Torben Iversen
Harvard Working Paper, August 2014
Abstract:
We formalize and examine two overlapping models that show how rising inequality combined with ethnic and racial heterogeneity can explain why many advanced industrial countries have experienced a drop in support for redistribution as inequality has risen. One model, based on altruism and homophily, focuses on the effect of increasing “social distance” between the poor and the middle class, especially when minorities are increasingly overrepresented among the very poor. The other, based on self-interest, combines an “insurance” model of preferences for redistribution with increasingly segmented labor markets, in which immigration of workers without recognized skills leaves most native workers better off but intensifies competition for low-end jobs. Empirically, when we estimate parameters from the two models using data from multiple waves of ISSP surveys, we find that labor market segmentation, previously omitted in this literature, has more consis!
tent effects than social distance.
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Socioeconomic Stereotypes: Explaining Variation in Preferences for Taxing the Rich
Jordan Michael Ragusa
American Politics Research, forthcoming
Abstract:
Motivated by research showing that policy preferences are driven by social-interests rather than strict self-interest, this article examines if stereotypes of “the rich” shape Americans’ tax policy preferences. For this project, an original free-response survey was designed asking respondents to describe “the rich.” Respondents offered 1,570 unique descriptions, ranging from “hard working” and “job producer” to “selfish” and “inheritance.” In the analysis, these stereotypes were modeled in three ways: (a) as affective stereotypes, (b) as discrete categories, and (c) as deservingness stereotypes. There are three main findings. First, political ideology and affective stereotypes have large and statistically indistinguishable effects on tax policy preferences. Second, deservingness stereotypes - in particular, whether the rich exhibit dispositional and prosocial characteristics - have par!
ticularly large effects on preferences for taxing the wealthy. And third, both affective and deservingness stereotypes have an interactive effect with personal ideology. For self-described liberals, preferences for taxing the wealthy are largely a function of ideological considerations. For conservatives, however, tax policy preferences are determined by a mix of ideology and stereotypes. In sum, the findings suggest that stereotypes affect policy preferences even when the target belongs to an advantaged group and the policy domain is nonracial.