Income Inequality and Social Mobility
Drawing Blood from Stones: Legal Debt and Social Inequality in the Contemporary United States
Alexes Harris, Heather Evans & Katherine Beckett
American Journal of Sociology, May 2010, Pages 1753-1799
Abstract:
The expansion of the U.S. penal system has important consequences for poverty and inequality, yet little is known about the imposition of monetary sanctions. This study analyzes national and state‐level court data to assess their imposition and interview data to identify their social and legal consequences. Findings indicate that monetary sanctions are imposed on a substantial majority of the millions of people convicted of crimes in the United States annually and that legal debt is substantial relative to expected earnings. This indebtedness reproduces disadvantage by reducing family income, by limiting access to opportunities and resources, and by increasing the likelihood of ongoing criminal justice involvement.
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Economic Development, Income Inequality, and Preferences for Redistribution
Michelle Dion & Vicki Birchfield
International Studies Quarterly, June 2010, Pages 315-334
Abstract:
Adopting a cross-regional and global perspective, this article critically evaluates one of the core assertions of political economy approaches to welfare - that support for redistribution is inversely related to income. We hypothesize that economic self-interest gives way to more uniform support for redistribution in the interest of ensuring that basic or relative needs are met in less developed and highly unequal societies. To test this hypothesis, we analyze individual-level surveys combined with country-level indicators for more than 50 countries between 1984 and 2004. Our analysis shows that individual-level income does not systematically explain support for redistribution in countries with low levels of economic development or high levels of income inequality. These findings challenge the universality of the assumption of economic self-interest in shaping preferences for redistribution that has been so pervasive in the literature.
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Occupations and the Structure of Wage Inequality in the United States, 1980s to 2000s
Ted Mouw & Arne Kalleberg
American Sociological Review, June 2010, Pages 402-431
Abstract:
Occupations are central to the stratification systems of industrial countries, but they have played little role in empirical attempts to explain the well-documented increase in wage inequality that occurred in the United States in the 1980s and 1990s. We address this deficiency by assessing occupation-level effects on wage inequality using data from the Current Population Survey for 1983 through 2008. We model the mean and variance of wages for each occupation, controlling for education and demographic factors at the individual level to test three competing explanations for the increase in wage inequality: (1) the growth of between-occupation polarization, (2) changes in education and labor force composition, and (3) residual inequality unaccounted for by occupations and demographic characteristics. After correcting for a problem with imputed data that biased Kim and Sakamoto's (2008) results, we find that between-occupation changes explain 66 percent of the increase in wage inequality from 1992 to 2008, although 23 percent of this is due to the switch to the 2000 occupation codes in 2003. Sensitivity analysis reveals that 18 percent of the increase in inequality from 1983 to 2002 is due to changes in just three occupations: managers "not elsewhere classified," secretaries, and computer systems analysts.
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Inequality of opportunity and income inequality in nine Chinese provinces, 1989-2006
Yingqiang Zhang & Tor Eriksson
China Economic Review, forthcoming
Abstract:
While there is a large and growing body of research describing and analyzing changes in the Chinese income distribution, researchers have paid considerable less attention to inequality of opportunity. The aim of this paper is to contribute to filling this gap in the literature. The two main questions addressed empirically for the first time in a Chinese context are: To what extent are individuals' incomes and individual income differences due to factors beyond the individual's control (in Roemer's terminology "circumstances") and to what extent are they due to outcomes of the individual's own choices ("effort"). What is the relationship between income inequality and inequality of opportunity? For this purpose we use data from the China Health and Nutrition Survey collected from nine provinces during the period 1989 to 2006. The CHNS has detailed information about incomes and other factors enabling us to construct a host of circumstance and effort variables for the offspring. We find that China has a substantial degree of inequality of opportunity. Parental income and parents' type of employer explain about two thirds of the total inequality of opportunity. Notably, parental education plays only a minor role implying that parental connections remain important. The results show that the increase in income inequality during the period under study largely mirrors the increase in inequality of opportunity. Thus, increased income inequality does not reflect changes in effort variables, or expressed differently, increased income inequality has not been accompanied by a decrease in inequality of opportunity.
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Sector‐Specific Human Capital and the Distribution of Earnings
Eric Smith
Journal of Human Capital, Spring 2010, Pages 35-61
Abstract:
This paper demonstrates the way in which assignment frictions-the limited ability of workers to find jobs in which they have a comparative advantage-affect the level and composition of human capital acquisition as well as the distribution of income. As workers become more likely to find their preferred job, they specialize more. Specialization raises expected income. It also exposes workers to a greater downside loss when the more desired employment opportunities are unavailable. More specialization thereby raises the earnings divide between those who match well and those who do not, which under some conditions leads to greater inequality.
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Teen employment, poverty, and the minimum wage: Evidence from Canada
Anindya Sen, Kathleen Rybczynski & Corey Van De Waal
Labour Economics, forthcoming
Abstract:
In May 2007, the U.S. Congress enacted legislation, which increased the Federal minimum hourly wage from $5.15 to $7.25, over a two year time period. This increase to the minimum wage was the first in nearly a decade and was approved with the objective of alleviating poverty among low income households. However, a higher minimum wage may result in more unemployment and poverty. We exploit time-series variation in minimum wages set by Canadian provinces between 1981 and 2004. OLS and IV results suggest that a 10% increase in the minimum wage is significantly correlated with a 3% - 5% drop in teen employment. Further, a 10% rise in the minimum wage is also significantly associated with a 4% - 6% increase in the percentage of families living under Low Income Cut Offs (LICOs). Difference-in-difference estimates from the 1993, 1995, and 1998 waves of the Survey of Consumer Finances (SCF) support these findings as they suggest that income earned by teens constitutes a non-trivial portion of household income for families beneath Low Income Cut Offs. Therefore, a higher minimum wage may paradoxically result in a significant negative shock to household income among low-income families.
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David Autor & Susan Houseman
American Economic Journal: Applied Economics, July 2010, Pages 96-128
Abstract:
Temporary-help jobs offer rapid entry into paid employment, but they are typically brief and it is unknown whether they foster longer term employment. We utilize the unique structure of Detroit's welfare-to- work program to identify the effect of temporary-help jobs on labor market advancement. Exploiting the rotational assignment of welfare clients to numerous nonprofit contractors with differing job placement rates, we find that temporary-help job placements do not improve and may diminish subsequent earnings and employment outcomes among participants. In contrast, job placements with direct-hire employers substantially raise earnings and employment over a seven quarter follow-up period.
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Labour Market Institutions and the Personal Distribution of Income in the OECD
Daniele Checchi & Cecilia García-Peñalosa
Economica, July 2010, Pages 413-450
Abstract:
A large literature has studied the impact of labour market institutions on wage inequality, but their effect on income inequality has received little attention. This paper argues that personal income inequality depends on the wage differential, the labour share and the unemployment rate. Labour market institutions affect income inequality through these three channels, and their overall effect is theoretically ambiguous. We use a panel of OECD countries for the period 1960-2000 to examine these effects. We find that greater unionization and greater wage bargaining coordination have opposite effects on inequality, implying conflicting effects of greater union presence on income inequality.
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Natural Resources and Income Inequality: The Role of Ethnic Divisions
Ruikang Marcus Fum & Roland Hodler
Economics Letters, June 2010, Pages 360-363
Abstract:
We hypothesize that natural resources raise income inequality in ethnically polarized societies, but reduce income inequality in ethnically homogenous societies; and we present empirical evidence in support of this hypothesis.
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Richard Breen & Leire Salazar
European Sociological Review, April 2010, Pages 143-157
Abstract:
It is widely believed that the growth in women's educational attainment and their increasing labour force participation, together with educational homogamy, will lead to greater inequality between households in their earnings. In this article, we use data from the United Kingdom to test that assertion. We use a new method of decomposing the change in household earnings inequality, and this allows us to identify effects associated with women's increasing educational attainment and consequential changes in their propensity to marry, in educational assortative mating and in labour-force participation. We find that changes in women's education and their behavioural consequences account for little if any of the growth in earnings inequality between households in the United Kingdom during the closing decades of the 20th century.
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Robert Erikson & John Goldthorpe
British Journal of Sociology, June 2010, Pages 211-230
Abstract:
Social mobility has become a topic of central political concern. In political and also media circles it is widely believed that in Britain today mobility is in decline. However, this belief appears to be based on a single piece of research by economists that is in fact concerned with intergenerational income mobility: specifically, with the relation between family income and children's later earnings. Research by sociologists using the same data sources - the British birth cohort studies of 1958 and 1970 - but focusing on intergenerational class mobility does not reveal a decline either in total mobility rates or in underlying relative rates. The paper investigates these divergent findings. We show that they do not result from the use of different subsets of the data or of different analytical techniques. Instead, given the more stable and generally less fluid class mobility regime, it is the high level of income mobility of the 1958 cohort, rather than the lower level of the 1970 cohort, that is chiefly in need of explanation. Further analyses - including ones of the relative influence of parental class and of family income on children's educational attainment - suggest that the economists' finding of declining mobility between the two cohorts may stem, in part at least, from the fact that the family income variable for the 1958 cohort provides a less adequate measure of 'permanent income' than does that for the 1970 cohort. But, in any event, it would appear that the class mobility regime more fully captures the continuity in economic advantage and disadvantage that persists across generations.
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The Impact of Migration on Poverty Concentrations in the United States, 1995-2000
Matt Foulkes & Kai Schafft
Rural Sociology, March 2010, Pages 90-110
Abstract:
Poverty is frequently conceptualized as an attribute of either people or places. Yet residential movement of poor people can redistribute poverty across places, affecting and reshaping the spatial concentration of economic disadvantage. In this article, we utilize 1995 to 2000 county-to-county migration data from the 2000 United States decennial census to explore how differential migration rates of the poor and nonpoor affect local incidence of poverty, and how migration reconfigures poverty rates across metropolitan, micropolitan, and noncore counties. We further examine the impact of differential migration rates on African American and Latino poverty rates, two groups that have experienced higher than average poverty rates and have a sizable presence in rural areas. Our analysis indicates that during the 1990s the poor moved at rates equal to or greater than the nonpoor, and that, especially in micropolitan counties, this movement tended to deepen existing poverty concentrations. Both African American and Latino migration patterns tended to reinforce existing poverty concentrations, a result similar to that of the population as a whole, although the migration patterns of both groups more severely exacerbated poverty in high-poverty noncore counties.
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Varisa Patraporn, Deirdre Pfeiffer & Paul Ong
Economic Development Quarterly, August 2010, Pages 288-303
Abstract:
Despite the increasing provision of social and financial services by community-based organizations (CBOs), few studies focus on the roles that Asian American-serving CBOs play in helping their economically and culturally diverse communities accumulate wealth. The authors explore this overlooked sector by interviewing key informants in 30 mostly Asian American asset-building organizations nationwide. Participating CBOs respond to the financial needs of their diverse communities primarily in three ways: (a) adapting programs for the underserved, (b) facilitating access to the mainstream, and (c) preserving existing assets. Unlike mainstream banks, they use a comprehensive asset-building framework premised on extensive technical assistance and culturally congruent programming. The interviewed organizations face a variety of challenges in implementing programs - namely, maintaining financial solvency and working with limited capacity - issues that they struggle to overcome through forming collaborations and partnerships, earned income strategies, obtaining certification, and cross-training.
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Michael Gurven et al.
Current Anthropology, February 2010, Pages 49-64
Abstract:
We present empirical measures of wealth inequality and its intergenerational transmission among four horticulturalist populations. Wealth is construed broadly as embodied somatic and neural capital, including body size, fertility and cultural knowledge, material capital such as land and household wealth, and relational capital in the form of coalitional support and field labor. Wealth inequality is moderate for most forms of wealth, and intergenerational wealth transmission is low for material resources and moderate for embodied and relational wealth. Our analysis suggests that domestication alone does not transform social structure; rather, the presence of scarce, defensible resources may be required before inequality and wealth transmission patterns resemble the familiar pattern in more complex societies. Land ownership based on usufruct and low‐intensity cultivation, especially in the context of other economic activities such as hunting and fishing, is associated with more egalitarian wealth distributions as found among hunter‐gatherers.
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The Effect of Changes in the Tax Structure on the Reported Income of High-Income Individuals
Hernan Acuna & Randall Holcombe
Public Finance Review, May 2010, Pages 321-345
Abstract:
Tax incidence theory shows how taxes initially placed on one group can be shifted and ultimately borne by others. This paper shows that income of high-income taxpayers is affected both by the rates they face and by the rates faced by non-high-income taxpayers. The income of high-income taxpayers rises when they face lower tax rates, but also rises in response to lower tax rates imposed on non-high-income taxpayers. While high-income responses to own statutory tax changes may be explained - at least partially - by their making a "smart use of the tax code," high-income responses to tax changes on non-high income individuals indicate the presence of structural effects of tax changes.
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Diana Worts, Amanda Sacker & Peggy McDonough
Social Indicators Research, July 2010, Pages 419-438
Abstract:
This paper addresses a key methodological challenge in the modeling of individual poverty dynamics - the influence of measurement error. Taking the US and Britain as case studies and building on recent research that uses latent Markov models to reduce bias, we examine how measurement error can affect a range of important poverty estimates. Our data are taken from the British Household Panel Survey and the US Panel Study of Income Dynamics, for working-aged adults over the period 1993-2003. For both national samples we ask how common vulnerability to poverty was over the period in question, what the entry and exit probabilities were for the group likely to transition into or out of poverty, and how effective redistributive programs were at protecting those most at risk. Crucially, in answering these questions we estimate and remove the effects of error in the measurement of poverty status. Throughout, we compare our results with estimates that do not take this error into account, and assess the implications for understanding poverty dynamics both within and between the two countries. Our modeling strategy extends previous research in several respects, enabling us to make stronger statements about measurement error and individual poverty dynamics. We find that correcting for error affects conclusions in important ways: Poverty is less temporary and risks are less widely dispersed than otherwise assumed, while cross-national differences are more pronounced.
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David Ellerman
Journal of Socio-Economics, forthcoming
Abstract:
Just as the two sides in the Cold War agreed that Capitalism and Communism were "the" two alternatives, so the two sides in the intellectual Great Debate agreed on a common framing of questions with the defenders of capitalism taking one side and Marxists taking the other. From the viewpoint of economic democracy (e.g., a labor-managed market economy), this late Great Debate between capitalism and socialism was as misframed as would be an antebellum Great Debate between the private or public ownership of slaves. The Great Debate between capitalism and socialism is now in the dustbin of intellectual history, but Marxism still plays an important role in sustaining the misframing of the questions so that the defenders of the present employment system do not have to face the real questions that separate that system from a system of economic democracy. In that sense, Marxism has become the ultimate capitalist tool.