It's all relative
Rising Stars and Sinking Ships: Consequences of Status Momentum
Nathan Pettit et al.
Psychological Science, forthcoming
Abstract:
Differences in rank are a ubiquitous feature of social life. Moving beyond the traditional static view of social hierarchy, five studies spanning multiple contexts examined how intertemporal changes in rank influenced people's status judgments. When final rank was held constant, people, products, and institutions were judged as higher status when they had arrived at this position by ascending, rather than descending, the hierarchy; moreover, these judgments affected downstream pricing recommendations, willingness to pay for products, and influence accepted from others. This impact of rank history on status judgments was accounted for by expectations of future status and moderated by the involvement of the self: The self and others are afforded an equivalent status boost for ascending to a given rank; however, only the self is pardoned the status tax that is levied on others for descending to the same rank. The theoretical utility of a dynamic approach to social hierarchy is discussed.
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Reassessing American Casualty Sensitivity: The Mediating Influence of Inequality
Douglas Kriner & Francis Shen
Journal of Conflict Resolution, forthcoming
Abstract:
Scholars have long conceptualized public support for war as the product of a cost-benefit calculation in which combat casualties factor significantly. This article argues that, when calculating the human costs of conflict, Americans care about more than just the number of war dead; they also care about the distribution of those casualties across society. Using two original survey experiments, we show that inequalities in sacrifice affect Americans' casualty sensitivity. We find strong evidence that learning about socioeconomic inequalities in casualties in previous wars decreases Americans' casualty tolerance toward future military endeavors. These effects are stronger for some mission types, particularly non-humanitarian interventions, than others. The effects are also concentrated among Americans from states that suffered high casualty rates in the Iraq War. Our results suggest that raising public awareness of inequalities in wartime sacrifice could significantly strengthen popular constraints on policy makers contemplating military solutions to future crises.
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Lewis Davis & Stephen Wu
Social Indicators Research, forthcoming
Abstract:
This paper explores the role of within group social comparisons on the life satisfaction of different racial and ethnic groups in the US. For Whites, we find that higher group income levels are associated with lower levels of life satisfaction, a result that is consistent with a preference for within group status. In contrast, life satisfaction is increasing in group income for Blacks. This result is consistent with the existence of social norms that emphasize Black solidarity. It is also consistent with an information effect in which Blacks rely on peer income levels to form expectations regarding their future prospects. We introduce a theoretical framework to help to distinguish between solidarity and information effects. Our empirical results provide strong support for the hypothesis that solidarity rather than information accounts for the positive relationship between average Black income and the subjective wellbeing of US Blacks. Finally, we consider two theories of social solidarity and find support for social salience but not social density in determining the strength of solidarity effects.
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Social Pressure at the Plate: Inequality Aversion, Status, and Mere Exposure
Brian Mills
Managerial and Decision Economics, forthcoming
Abstract:
This paper uses professional baseball data to evaluate the impact of social pressures on subjective decisions made by officials. Umpires show tendencies consistent with both centrality bias and favoritism toward players with higher status in the league. Results also indicate that the odds of a strike are lower for batters in close proximity to the official throughout the game. Implications extend beyond sport to issues regarding closeness of contact in employee-manager relationships and pay and promotions decisions in the workplace. Given the persistent monitoring of officials in professional baseball, this phenomenon could be more prevalent in less scrutinized positions in other industries.
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Risk Segmentation of American Homes: Evidence from Denver
Liang Peng & Thomas Thibodeau
Real Estate Economics, forthcoming
Abstract:
This article empirically examines the segmentation of house price risk across 99 ZIP-code-delineated neighborhoods in metropolitan Denver. The house price risk in each neighborhood is measured with the temporal variation of quarterly appreciation rates of the neighborhood house price index over the 2002-2007 period. Cross-sectional regressions of neighborhood house price risk on the median household income and the percentage of population in poverty from the 2000 census data for the same neighborhoods provide strong evidence that the house price risk is significantly higher in low-income/poor neighborhoods. Subperiod analyses further indicate that the risk segmentation exists in both a booming period (pre 2005:2) and a busting period (post 2005:3). The results indicate that homeownership can be a much riskier investment for low-income/poor households.
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Inequality and Decision Making: Imagining a New Line of Inquiry
David Moss, Anant Thaker & Howard Rudnick
Harvard Working Paper, June 2013
Abstract:
The substantial increase in inequality in the United States over the past three decades has provoked considerable debate, with some analysts characterizing rising inequality as among the greatest threats facing the nation and others dismissing it as little more than a hiccup - or even celebrating it as a favorable development - in the progress of American capitalism. Despite numerous claims in popular venues that high inequality has slowed growth, precipitated financial instability, and profoundly distorted the nation's political system, our review of the literature finds no academic consensus on the consequences of inequality for the health of the economy or the democracy, or for nearly any other macro-level outcome. With the academic community reaching inconclusive and conflicting findings, we suggest that careful empirical study of possible mechanisms by which income inequality may exert macro-level effects is warranted. We suggest further that one potential mechanism that may be especially worthy of investigation relates to possible effects of high or rising inequality on individual decision making. Drawing on nascent research, we examine a handful of pathways through which inequality may plausibly influence individual decisions. Finally, we propose ways that these and other pathways might be productively explored and assessed through behavioral experiments. By bringing together what are today two separate areas of research - decision making and inequality (or social disparity) - this new line of inquiry could help to break the stalemate that has, until now, characterized the study of inequality and its consequences.
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Neha John-Henderson et al.
Social Psychological and Personality Science, forthcoming
Abstract:
We experimentally tested whether negative stereotypes linked to lower socioeconomic status (SES), in addition to impairing academic performance (Croizet & Claire, 1998), instigate inflammation processes that are implicated in numerous disease processes. In Study 1, verbal test performance and activation of inflammation processes (measured by levels of an inflammatory protein, Interleukin-6 [IL-6]) varied as a function of SES and test framing (i.e., diagnostic vs. nondiagnostic of intellectual ability), with low SES students underperforming and exhibiting greater IL-6 production in the "diagnostic" condition. In Study 2, students expected their verbal exam performance to be compared to peers of higher or lower SES. Low SES students in the upward comparison condition displayed the greatest inflammatory response and worst test performance. Across both studies, different facets of SES predicted vulnerability to negative outcomes, such that low early life SES predicted heightened inflammation responses, while low current SES predicted impaired academic performance.
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Lower subjective social status exaggerates interleukin-6 responses to a laboratory stressor
Heather Derry et al.
Psychoneuroendocrinology, forthcoming
Abstract:
Growing evidence suggests that lower subjective social status (SSS), which reflects where a person positions himself on a social ladder in relation to others, is independently related to poor health. People who rate themselves lower in status also experience more frequent stressors and report higher stress than those who rate themselves higher in status, and chronic stress can enhance an individual's response to subsequent stressors. To address whether SSS predicted stress-induced interleukin-6 (IL-6) changes, we assessed 138 healthy adults at rest and following the Trier Social Stress Test (TSST). Participants completed the TSST at two study visits, separated by 4 months. People who placed themselves lower on the social ladder had larger IL-6 responses from baseline to 45 min post-stressor (p = 0.01) and from baseline to 2 h post-stressor (p = 0.03) than those who placed themselves higher on the social ladder. Based on a ratio of subjective threat and coping ratings of the stress task, participants who viewed themselves as lower in status also tended to rate the speech task as more threatening and less manageable than those who viewed themselves as higher in status (p = 0.05). These data suggest that people with lower perceived status experience greater physiological and psychological burden from brief stressors compared to those with higher perceived status. Accordingly, responses to stressors may be a possible mechanistic link among SSS, stress, and health.
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Nathaniel Hendren
NBER Working Paper, June 2013
Abstract:
This paper provides a generic framework for evaluating the welfare impact of government policy changes towards taxes, transfers, and publicly provided goods. The results show that the behavioral response required for welfare measurement is the causal impact of each agent's response to the policy on the government's budget. A decomposition of this response into income and substitution effects is not required. Because these desired elasticities vary with the policy in question, I term them policy elasticities. I also provide an additivity condition that yields a natural definition of the marginal costs of public funds as welfare impact of a policy per dollar of its cost to the government budget. Finally, I use the model, along with causal estimates from existing literature, to study the welfare impact of additional redistribution by increasing the generosity of the earned income tax credit financed by an increase in the top marginal income tax rate. I show existing causal estimates suggest additional redistribution is desirable if and only if providing an additional $0.44 to an EITC-eligible single mother (earning less than $40,000) is preferred to providing an additional $1 to a person subject to the top marginal tax rate (earning more than $400,000).
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The Economic Security Index: A New Measure for Research and Policy Analysis
Jacob Hacker et al.
Review of Income and Wealth, forthcoming
Abstract:
This article presents the Economic Security Index (ESI), a new measure of economic insecurity. The ESI assesses the individual-level occurrence of substantial year-to-year declines in available household resources, accounting for fluctuations not only in income but also in out-of-pocket medical expenses. It also assesses whether those experiencing such declines have sufficient liquid financial wealth to buffer against these shocks. We find that insecurity - the share of individuals experiencing substantial resource declines without adequate financial buffers - has risen steadily since the mid-1980s for virtually all subgroups of Americans, albeit with cyclical fluctuation. At the same time, we find that there is substantial disparity in the degree to which different subgroups are exposed to economic risk. As the ESI derives from a data-independent conceptual foundation, it can be measured using different panel datasets. We find that the degree and disparity by which insecurity has risen is robust across the best available sources.
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American income inequality across economic and geographic space, 1970-2010
David Peters
Social Science Research, forthcoming
Abstract:
This analysis examines the spatial clustering of income inequality and its socioeconomic correlates at the meso-scale over the past four decades. Cluster analysis is used to group N=3,078 counties into five inequality clusters; and multinomial logistic regression is used to assess the effects of socioeconomic correlates. High and extreme inequality places are concentrated in large metropolitan centers, high amenity rural areas, and parts of the Great Plains and Mountain West. They tend to have better socioeconomic outcomes, with fewer at-risk populations, higher incomes, lower poverty, and greater economic participation. Unequal places are more specialized in high-skill finance and professional services, and in energy-based mining. By contrast, equality places are associated with low-skill services, education and health services, manufacturing, and stable farm economies.
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Intergenerational Earnings Mobility: A New Decomposition of Investment and Endowment Effects
Buly Cardak, David Johnston & Vance Martin
Labour Economics, October 2013, Pages 39-47
Abstract:
This paper investigates the contribution of investments and endowments in generating intergenerational persistence in earnings. The empirical analysis involves the estimation of a theoretical model where log-earnings of children are determined by the log-earnings of parents and two sources of randomness arising from labour market and endowment shocks. An important feature of the model is that it predicts a nonlinear relationship between earnings across generations, thereby providing support for nonlinear specifications adopted previously. Using PSID data on father-son pairs in the US over the period 1968 to 2005, the results show that about one-third of the intergenerational earnings elasticity arises from investments with the remaining two-thirds coming from endowments. The results also show that the relative decomposition varies with log-earnings of fathers, with the investment effect dominating the endowment effect at low incomes and the reverse occurring at high incomes.
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Shannon McCoy et al.
European Journal of Social Psychology, June 2013, Pages 307-318
Abstract:
Consensually held ideologies may serve as the cultural "glue" that justifies hierarchical status differences in society . Yet to be effective, these beliefs need to be embraced by low status groups. Why would members of low status groups endorse beliefs that justify their relative disadvantage? We propose that members of low status groups in the USA may benefit from some system-justifying beliefs (such as the belief in meritocracy) to the extent that these beliefs emphasize the perception of control over future outcomes. In two studies, among women, lower socioeconomic status women, and women of color, we found a positive relationship between the belief in meritocracy and well-being (self-esteem and physical health) that was mediated by perceived control. Members of low status groups may benefit from some system-justifying beliefs to the extent that these beliefs, such as the belief in meritocracy, emphasize the perception of control over future outcomes.
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Jessica Harding & Chris Sibley
Social Indicators Research, August 2013, Pages 401-418
Abstract:
We examined the extent to which system justification buffered the negative effect of retrospective experiences of active harm from general sources in society on life satisfaction during the same assessment period, and prospectively 1 year later. Results from a nationally representative sample indicated that the retrospective assessment of active harm and quality of life were uncorrelated for people who endorsed system justifying ideology (N = 6,518). Study 2 replicated the concurrent buffering effect of system justification on subjective wellbeing and demonstrated that the effect reversed over time. For people high in system justification beliefs, societal-level harm prospectively predicted lower life satisfaction 1 year later (N = 136 undergraduates). Perceiving the system as fair and legitimate in the face of harm from others in society has opposing short and longer-term effects on wellbeing. We argue that these opposing effects occur because although system justification trumps experiences of harm and buffers life satisfaction in the short-term; the resulting experience-belief conflict engenders a state of ideological dissonance that predicts negative psychological outcomes down the track.
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Ashleigh Shelby Rosette & Leigh Plunkett Tost
Psychological Science, forthcoming
Abstract:
Researchers have suggested that viewing social inequity as dominant-group privilege (rather than subordinate-group disadvantage) enhances dominant-group members' support for social policies aimed at lessening such inequity. However, because viewing inequity as dominant-group privilege can be damaging to dominant-group members' self-images, this perspective is frequently resisted. In the research reported here, we explored the circumstances that enhance the likelihood of dominant-group members' viewing inequity as privilege. Because social hierarchies have multiple vertical dimensions, individuals may have high status on one dimension but low status on another. We predicted that occupying a subordinate position on one dimension of social hierarchy could enhance perceptions of one's own privilege on a different dimension of hierarchy, but that this tendency would be diminished among individuals who felt they had achieved a particularly high level of success. Results from three studies that considered gender-based and race-based hierarchies in organizational settings supported our hypothesis.
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The impact of superordinate identification on the justification of intergroup inequalities
Katarzyna Jaśko & Małgorzata Kossowska
European Journal of Social Psychology, June 2013, Pages 255-262
Abstract:
Previous research on superordinate identification demonstrated the positive effects of such identification on intergroup relations. Our study investigated the hypothesis that superordinate identity increases acceptance of intergroup inequalities among members of low-status groups. The results obtained from two studies supported our predictions. Superordinate identification increased the justification of unequal funding by members of the disadvantaged group (Study 1) and the acceptance of displaying religious symbols in public places among non-believers (Study 2). In contrast, identification with the low-status subgroup decreased perceived legitimacy of unequal intergroup arrangements. The results demonstrate that superordinate identification can have a negative influence on willingness to act in line with subgroup interest among members of disadvantaged groups.
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An Empirical Model of Tax Convexity and Self-Employment
Jean-François Wen & Daniel Gordon
Review of Economics and Statistics, forthcoming
Abstract:
Do progressive marginal income tax rates discourage self-employment? We assume risk neutrality to construct an implicit surtax on stochastic income relative to steady income, arising from a convex tax schedule. It is computed as part of a structural probit model with earnings equations and a tax simulator. The tax convexity variable and the net-of-tax income difference between self- and paid-employment have the predicted signs and high levels of statistical significance for the probability of self-employment. A simulated flat tax reform suggests the tax effects are small.
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Absolute and relative family affluence and psychosomatic symptoms in adolescents
Frank Elgar et al.
Social Science & Medicine, August 2013, Pages 25-31
Abstract:
Previous research on links between income inequality and health and socioeconomic differences in health suggests that relative differences in affluence impact health and well-being more than absolute affluence. This study explored whether self-reported psychosomatic symptoms in adolescents relate more closely to relative affluence (i.e., relative deprivation or rank affluence within regions or schools) than to absolute affluence. Data on family material assets and psychosomatic symptoms were collected from 48,523 adolescents in eight countries (Austria, Belgium, Canada, Norway, Scotland, Poland, Turkey, and Ukraine) as part of the 2009/10 Health Behaviour in School-aged Children study. Multilevel regression analyses of the data showed that relative deprivation (Yitzhaki Index, calculated in regions and in schools) and rank affluence (in regions) (1) related more closely to symptoms than absolute affluence, and (2) related to symptoms after differences in absolute affluence were held constant. However, differences in family material assets, whether they are measured in absolute or relative terms, account for a significant variation in adolescent psychosomatic symptoms. Conceptual and empirical issues relating to the use of material affluence indices to estimate socioeconomic position are discussed.
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Technology Diffusion and Its Effects on Social Inequalities
Manuela Magalhães & Christian Hellström
Journal of Macroeconomics, forthcoming
Abstract:
We develop a dynamic general-equilibrium framework in which growth is driven by skill-biased technology diffusion. The model incorporates leisure-labor decisions and human capital accumulation through education. We are able to reproduce the trends in income inequality and labor and skills supplies observed in the United States between 1969 and 1996. The paper also provides an explanation for why more individuals invest in human capital when the investment premium is going down, and why the skill-premium goes up when the skills supply is increasing.
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The Global Decline of the Labor Share
Loukas Karabarbounis & Brent Neiman
NBER Working Paper, June 2013
Abstract:
The stability of the labor share of income is a key foundation in macroeconomic models. We document, however, that the global labor share has significantly declined since the early 1980s, with the decline occurring within the large majority of countries and industries. We show that the decrease in the relative price of investment goods, often attributed to advances in information technology and the computer age, induced firms to shift away from labor and toward capital. The lower price of investment goods explains roughly half of the observed decline in the labor share, even when we allow for other mechanisms influencing factor shares such as increasing profits, capital-augmenting technology growth, and the changing skill composition of the labor force. We highlight the implications of this explanation for welfare and macroeconomic dynamics.
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Factor Components of Inequality: A Cross-Country Study
Cecilia García-Peñalosa & Elsa Orgiazzi
Review of Income and Wealth, forthcoming
Abstract:
This paper uses data from the Luxembourg Income Study to examine some of the forces that have driven changes in household income inequality over the last three decades of the twentieth century. We decompose inequality for six countries (Canada, Germany, Norway, Sweden, the U.K., and the U.S.) into the three sources of market income (earnings, property income, and income from self-employment) and taxes and transfers. Our findings indicate that although changes in the distribution of earnings are an important force behind recent trends, they are not the only one. Greater earnings dispersion has in some cases been accompanied by a reduction in the share of earnings which dampened its impact on overall household income inequality. In some countries the contribution of self-employment income to inequality has been on the rise, while in others, increases in inequality in capital income account for a substantial fraction of the observed distributional changes.
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Gulgun Bayaz-Ozturk, Richard Burkhauser & Kenneth Couch
Economic Inquiry, forthcoming
Abstract:
The cross-national intragenerational literature has often analyzed income mobility within short time periods over which mobility might reasonably be thought of as invariant. Here, we argue that a great social transformation - German reunification - abruptly and permanently altered mobility. Using standard measures (with panel data for the western states of Germany and the United States) over the period 1984-2006, we find the conventional result that income mobility is greater in Germany. But when we cut the data into 5-year windows, we find that income mobility declines significantly over the years immediately following reunification in Germany but not in the United States, using both measures.
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The College Type: Personality and Educational Inequality
Shelly Lundberg
Journal of Labor Economics, July 2013, Pages 421-441
Abstract:
I examine the effects of cognitive ability and personality traits on college graduation in a recent cohort of young Americans, and how the returns to these traits vary by family background, and find very substantial differences across family background groups in the personality traits that predict successful completion of college, particularly for men. The implications are twofold. First, the returns to noncognitive traits may be highly context dependent. Second, policy discussion concerning educational inequality should include not just the possibilities for remediating the skill levels of poor children, but also approaches to changing the environments that limit their opportunities.
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The Distribution and Determinants of Socially Supplied Political Expertise
Paul Djupe & Anand Edward Sokhey
American Politics Research, forthcoming
Abstract:
Recent work on social influence has highlighted the importance of socially supplied political expertise, crediting it with strengthening attitudes, resolving ambivalence, and encouraging political participation. However, in focusing on the consequences of socially supplied political expertise, scholars have made the implicit assumption that citizens have equal access to this resource and have largely ignored its distribution. Given that individuals are constrained by their social contexts, we are particularly troubled by this oversight, and thus use two nationally representative data sources to explore the distribution of expertise among and throughout the social networks of citizens. We find consistent evidence that existing resource inequalities reinforce the unequal distribution of expertise in social networks - a gender-moderated pattern that involvement in civil society may help remedy.