Equal Outcomes

Kevin Lewis

July 23, 2021

Economic Inequality and the Pursuit of Pleasure
Jason Hannay, Keith Payne & Jazmin Brown-Iannuzzi
Social Psychological and Personality Science, forthcoming


The present research proposes and tests the "hedonic risk hypothesis" that affective experiences of pleasure provide a common currency that people use to equate economic and hedonic inequality. As a result, economic inequality can increase risk-taking in pursuit of pleasure even in noneconomic domains. Study 1 showed that higher economic inequality at the state level was associated with people in those states spending more time pursuing pleasure. Studies 2-4 were experiments, which demonstrated that when people perceive inequality in other people's hedonic experience, they become riskier in their pursuit of pleasure for themselves. The relationship between inequality and risk-taking in pursuit of pleasurable experiences was moderated by upward social comparisons. Both monetary and hedonic inequality caused participants to become riskier in their pursuit of pleasure. The findings suggest a psychological pathway by which systemic effects of income inequality may affect individual health and social outcomes.

Tasks, Automation, and the Rise in US Wage Inequality
Daron Acemoglu & Pascual Restrepo
NBER Working Paper, June 2021


We document that between 50% and 70% of changes in the US wage structure over the last four decades are accounted for by the relative wage declines of worker groups specialized in routine tasks in industries experiencing rapid automation. We develop a conceptual framework where tasks across a number of industries are allocated to different types of labor and capital. Automation technologies expand the set of tasks performed by capital, displacing certain worker groups from employment opportunities for which they have comparative advantage. This framework yields a simple equation linking wage changes of a demographic group to the task displacement it experiences. We report robust evidence in favor of this relationship and show that regression models incorporating task displacement explain much of the changes in education differentials between 1980 and 2016. Our task displacement variable captures the effects of automation technologies (and to a lesser degree offshoring) rather than those of rising market power, markups or deunionization, which themselves do not appear to play a major role in US wage inequality. We also propose a methodology for evaluating the full general equilibrium effects of task displacement (which include induced changes in industry composition and ripple effects as tasks are reallocated across different groups). Our quantitative evaluation based on this methodology explains how major changes in wage inequality can go hand-in-hand with modest productivity gains.

The Consolidation of Education and Health in Families
Vida Maralani & Camille Portier
American Sociological Review, forthcoming


For a given person, many socioeconomic resources are correlated, but resources also accumulate in families, depending on how people sort in relationships based on their individual characteristics. This study proposes that people match on multiple resources in long-term relationships as a strategy for creating families with systematically advantaged portfolios - a strategy we call "consolidation." Analyzing Health and Retirement Study data and using smoking as a measure of health, we show that couples match on both educational and health statuses at the start of marriage, and this systematic pattern of matching intensifies over time. We find that matching on smoking is not simply a byproduct of educational homogamy, and that matching on smoking/non-smoking status has increased over time. Moreover, couples increasingly sort on education and health jointly, such that highly educated couples are even more likely to be nonsmoking than would be expected by matching on education or smoking status alone. Increasing educational inequalities in quitting smoking between marriage and first birth reinforce this consolidation process. Using Current Population Surveys, we find these patterns are stronger in marriages than in cohabitations. The consolidation of education and health in couples is an important mechanism that amplifies inequality in families and, potentially, across generations.

Income Segregation's Impact on Local Public Expenditures: Evidence from Municipalities and School Districts, 1980 - 2010
Ryan Gallagher
Regional Science and Urban Economics, forthcoming


Residential income segregation within local political jurisdictions has risen considerably since 1980 in the U.S. Despite this trend, and a growing body of research on wealth inequality and its impact on public sector size, income segregation's own influence over local public choice has not been thoroughly investigated. Using block-group income distributions for the years 1980, 1990, 2000, and 2010 income segregation is measured for individual U.S. municipalities and school districts, where the spatial distribution of income may carry the most political relevance. Estimates indicate that rising income segregation reduced per-capita spending growth considerably for both municipalities and school districts. These findings are robust to various model specifications and to the use of instrumental variables that adjust for the potential endogeneity of local income segregation. This evidence is consistent with the view that intra-jurisdictional income segregation undermines trust between community members and complicates collection action. However, a-spatial income inequality continues to be positively correlated with local public sector size, as suggested by recent empirical research.

Skills, Degrees and Labor Market Inequality
Peter Blair, Papia Debroy & Justin Heck
NBER Working Paper, July 2021


Over the past four decades, income inequality grew significantly between workers with bachelor's degrees and those with high school diplomas (often called "unskilled"). Rather than being unskilled, we argue that these workers are STARs because they are skilled through alternative routes -- namely their work experience. Using the skill requirements of a worker's current job as a proxy of their actual skill, we find that though both groups of workers make transitions to occupations requiring similar skills to their previous occupations, workers with bachelor's degrees have dramatically better access to higher-wage occupations where the skill requirements exceed the workers' observed skill. This measured opportunity gap offers a fresh explanation of income inequality by degree status and reestablishes the important role of on-the-job training in human capital formation.

Income inequality and housing prices in the very long-run
Abebe Hailemariam et al.
Southern Economic Journal, July 2021, Pages 295-321


We examine the relationship between income inequality and house prices for a panel of 17 OECD countries over the period 1870 to 2015. Our identification strategy takes advantage of exogenous variation in culturally weighted communist influence to instrument for within-country variations in income inequality. Controlling for endogeneity, time, and country fixed effects, our results suggest that an increase in income inequality has a significant negative effect on real house prices. This finding is robust to the use of both the Gini coefficient and top income share as measures of income inequality and the use of absolute and relative income inequality measures, as well as a range of other robustness checks. We examine crime as a mechanism through which income inequality influences housing prices and find that the theft rate is a channel via which higher income inequality contributes to lower house prices.

Donor Financial Capacity Drives Racial Inequality in Medical Crowdsourced Funding
Mark Igra
Social Forces, forthcoming


Americans facing large health-related expenses have increasingly turned to online crowdsourced funding for support, initiating 250,000 medical fundraisers on GoFundMe in 2018. Recent research indicates that these fundraisers yield inequitable outcomes, with White crowdfunding beneficiaries receiving higher levels of support than non-White beneficiaries. Researchers fear that racialized impressions of deservingness may be a driver of unequal returns in crowdfunding. However, rather than being a direct effect of interpersonal racism, differences in returns may be an indirect effect of the systemic racism that causes the social networks of Black and Hispanic Americans to have lower access to financial capital. This paper is the first to focus on how unequal access to monetary capital in networks of potential crowdfunding donors drives unequal returns for beneficiaries. I analyze a geographically stratified sample of 2,618 GoFundMe campaigns coded for perceived race and ethnicity of the beneficiary. I estimate donor financial capacity for each campaign based on the geography of Facebook friend networks and the most likely racial and ethnic makeup of the donor pool, based on donor surnames. I show that variations in the estimated income of potential donors can account for much of the deficit in returns. Thus, even in the absence of interpersonal discrimination, crowdfunding is unlikely to yield equitable outcomes given the current distribution of financial resources in the United States.

Macroeconomic Misery by Levels of Income in America
Martin Ravallion
NBER Working Paper, July 2021


Thirty years of distributional data are used to study the short-term impacts of popular macroeconomic indicators on real household incomes from the poorest to the richest Americans. The appropriate weights on unemployment versus inflation vary across the distribution. The unemployment rate matters at all levels, but especially so for the poorest. Inflation rates matter at middle incomes, though Okun's famous Misery Index only performs well for the top income groups. GDP growth matters at all levels and proportionately more for the poorest, though only via the unemployment rate. Recessions are poverty-increasing, and skewness-decreasing, but with ambiguous effects on overall inequality.

Context in continuity: The enduring legacy of neighborhood disadvantage across generations
Steven Elías Alvarado & Alexandra Cooperstock
Research in Social Stratification and Mobility, forthcoming


Neighborhoods may contribute to the maintenance of inequality in well-being across generations. We use restricted geo-coded National Longitudinal Survey of Youth data (NLSY 1979 and NLSY Child and Young Adult) to estimate the association between multigenerational exposure to childhood neighborhood disadvantage and subsequent adult exposure. Invoking cousin fixed effects models that adjust for unobserved legacies of disadvantage that cascade across three generations, we find that families where both parents and their children are exposed to childhood neighborhood disadvantage are likely to pass on the legacy of neighborhood disadvantage to successive generations, net of observed and unobserved confounders. Second, we find a direct intergenerational neighborhood association, net of observed and unobserved confounders. Third, we find that unobserved confounders nested in the grandparent generation explain away the intragenerational neighborhood association. These findings reorient neighborhood theory to more seriously attend to the interdependence of neighborhood-level and individual-level antecedents of inequality across generations.

Inclusive institutions, unequal outcomes: Democracy, state capacity, and income inequality
Mart Trasberg & Hector Bahamonde
European Journal of Political Economy, forthcoming


Although the relationship between democratic rule and income inequality has received important attention in recent literature, the evidence has been far from conclusive. In this paper, we explore whether the redistributive effect of democratic rule is conditional on state capacity. Previous literature has outlined that pre-existing state capacity may be necessary for inequality-reducing policies under democratic rule. In contrast to that intuitive view, this study argues that democratic rule and high state capacity combined produce higher levels of income inequality over time. This relationship operates through the positive effect of high-capacity democratic context on foreign direct investment and financial development. By making use of a novel measure of state capacity based on cumulative census administration, we find empirical support for these claims using fixed-effects panel regressions with the data from 126 industrial and developing countries between 1970 and 2013.

How Americans Respond to Idiosyncratic and Exogenous Changes in Household Wealth and Unearned Income
Mikhail Golosov et al.
NBER Working Paper, July 2021


We study how Americans respond to idiosyncratic and exogenous changes in household wealth and unearned income. Our analyses combine administrative data on U.S. lottery winners with an event-study design that exploits variation in the timing of lottery wins. Our first contribution is to estimate the earnings responses to these windfall gains, finding significant and sizable wealth and income effects. On average, an extra dollar of unearned income in a given period reduces pre-tax labor earnings by about 50 cents, decreases total labor taxes by 10 cents, and increases consumption by 60 cents. These effects are heterogeneous across the income distribution, with households in higher quartiles of the income distribution reducing their earnings by a larger amount. Our second contribution is to develop and apply a rich life-cycle model in which heterogeneous households face non-linear taxes and make earnings choices along both intensive and extensive margins. By mapping this model to our estimated earnings responses, we obtain informative bounds on the impacts of two policy reforms: an introduction of UBI and an increase in top marginal tax rates. Our last contribution is to study how additional wealth and unearned income affect a wide range of behavior, including geographic mobility and neighborhood choice, retirement decisions and labor market exit, family formation and dissolution, entry into entrepreneurship, and job-to-job mobility.

The Role of Gender in Employment Polarization
Fabio Cerina, Alessio Moro & Michelle Rendall
International Economic Review, forthcoming


We document that U.S. employment polarization in the 1980-2017 period is largely generated by women. In addition, we provide evidence that the increase of employment shares at the bottom of the skill distribution is generated in market sectors producing services representing home production substitutes. We use a calibrated macroeconomic model to show that a rising skill premium induces high-skilled women to participate more in the labor market, reduce home working hours, and demand more home substitutes in the market, thus fostering a rise in employment shares at the bottom of the skill distribution. Counterfactual experiments suggest that without the large increase in the skill premium of high-skilled women, employment polarization would have been substantially reduced, and changes of employment shares at the bottom of the distribution would have been negative.

Subjective Economic Inequality Decreases Emotional Intelligence, Especially for People of High Social Class
Anita Schmalor & Steven Heine
Social Psychological and Personality Science, forthcoming


Across five studies (three preregistered; N = 2,481), we investigated two effects as follows: (1) Is higher subjective economic inequality associated with a decreased ability to accurately identify emotions (emotional intelligence)? When inequality is high, people are less focused on others and may thus be less motivated to correctly identify their emotions. (2) Is this main effect of subjective inequality qualified by an interaction with socioeconomic status (SES)? Past research suggests that high SES leads to lower emotional intelligence because people of higher SES are less dependent on others and thus less motivated to identify their emotions. When perceiving higher inequality, high SES individuals should feel even more self-reliant, thereby exacerbating the difference in emotional intelligence between people of low and high SES. We provide empirical support in three out of five studies for the first and in four out of five studies for the second hypothesis. An internal meta-analysis supported both hypotheses.


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