Lifting Boats
Marginal tax rates and income in the long run: Evidence from a structural estimation
Patrick Macnamara, Myroslav Pidkuyko & Raffaele Rossi
Journal of Monetary Economics, forthcoming
Abstract:
We estimate a life-cycle model of savings, labor productivity and entrepreneurs to measure the long-run response of income to marginal tax rate cuts in the US. Long-run tax elasticities of income are largest for the richest 1% but are also positive and substantial for other income groups. In equilibrium, entrepreneurs obtain higher returns on wealth. This increases the investment response of rich, high-return entrepreneurs, amplifying their income elasticity to tax cuts. This leads to a reallocation of capital which increases TFP, and generates a boost in wages that magnifies the estimated income response of the bottom 90% as well.
The causal effect of regulation on income inequality across the U.S. states
Sanchari Choudhury
European Journal of Political Economy, forthcoming
Abstract:
In the last several decades, despite widespread concerns about rising income inequality and increasing federal regulations in the United States, only a small group of researchers have tried exploring and understanding this relationship to date. Relevant empirical studies, overall, find regulations to exacerbate income distribution, thereby increasing income inequality within an economy. Recently, a similar association has been reported for the U.S. However, the existing analysis lacks evidence of a causal effect. Here, I unravel the causal impact of federal regulation of industries on income inequality across the U.S. states for the time span 1990–2013. For this, I address the potential endogeneity of regulation via a non-traditional identification strategy. The results are worth noting. There is reasonable evidence for regulation to be endogenous. Controlling for this yields a positive, statistically, and economically significant impact, implying a substantial increase in income inequality due to increased regulatory restrictions in a state. This contrasts with the findings of the naive estimation strategy, where the endogeneity issue is totally ignored.
Wealth inequality and democracy
Sutirtha Bagchi & Matthew Fagerstrom
Public Choice, October 2023, Pages 89–136
Abstract:
Scholars have studied the relationship between land inequality, income inequality, and democracy extensively, but have reached contradictory conclusions that have resulted from competing theories and methodologies. However, despite its importance, the effects of wealth inequality on democracy have not been examined empirically. We use a panel dataset of billionaire wealth from 1987 to 2012 to determine the impact of wealth inequality on the level of democracy. We measure democracy using Polity scores, Varieties of Democracy (V-Dem) indices, and the continuous Machine Learning index. We find limited empirical support for the hypothesis that overall wealth inequality or inherited wealth inequality has an impact on democracy. However, we find evidence that politically connected wealth inequality lowers V-Dem and Machine Learning democracy scores. Following Boix (Democracy and redistribution, Cambridge University Press, New York, 2003), we investigate the hypothesis that capital mobility moderates the relationship between wealth inequality and democracy and find evidence that increased capital mobility mitigates the negative impact of politically connected wealth inequality on democracy.
Parental socioeconomic status weakly predicts specific cognitive and academic skills beyond general cognitive ability
Giacomo Bignardi, Silvana Mareva & Duncan Astle
Developmental Science, forthcoming
Abstract:
Parental socioeconomic status (SES) is a well-established predictor of children's neurocognitive development. Several theories propose that specific cognitive skills are particularly vulnerable. However, this can be challenging to test, because cognitive assessments are not pure measures of distinct neurocognitive processes, and scores across different tests are often highly correlated. Aside from one previous study by Tucker-Drob, little research has tested if associations between SES and cognition are explained by differences in general cognitive ability rather than specific cognitive skills. Using structural equation modelling (SEM), we tested if parental SES is associated with individual cognitive test scores after controlling for latent general cognitive ability. Data from three large-scale cohorts totalling over 16,360 participants from the UK and USA (ages 6–19) were used. Associations between SES and cognitive test scores are mainly (but not entirely) explained through general cognitive ability. Socioeconomic advantage was associated with particularly strong vocabulary performance, unexplained by general ability. When controlling for general cognitive ability, socioeconomic disadvantage was associated with better executive functions. Better characterizing relationships between cognition and adversity is a crucial first step toward designing interventions to narrow socioeconomic gaps.
Differential sensitivity to adversity by income: Evidence from a study of bereavement
Tamkinat Rauf
Social Science Research, September 2023
Abstract:
Adverse life events are often understood as having negative consequences for mental health via objective hardships, which are worse for persons with less income. But adversity can also affect mental health via more subjective mechanisms, and here, it is possible that persons with higher income will exhibit greater psychological sensitivity to negative events, for various reasons. Drawing on multiple sociological literatures, this article theorizes potential mechanisms of increasing sensitivity with income. The proposition of differential sensitivity is tested using the strategic case of spousal and parental bereavement among older US adults. The analyses find consistent evidence of increasing sensitivity of depressive symptoms with income. A series of robustness checks indicate that findings are not due to endogenous or antecedent selection. Further, exploratory analyses of mechanisms suggest that higher sensitivity among the affluent was driven by greater expectations and better relationship quality with the deceased. These findings problematize the conceptualization and assessment of human suffering in economically stratified societies.
Recent changes in the nature of the distribution dynamics of the US county incomes
Seonyoung Park & Donggyun Shin
Journal of Applied Econometrics, forthcoming
Abstract:
We study the evolution of the cross-sectional distributions of county-level per capita income in the United States from 1970 to 2017. We confirm previous findings of convergence in pre-transfer income during the 1970s and 1980s but present new evidence of rising inequality since the early 1990s, which is characterized by bipolarization. Cross-county differences in education and industry composition explain much of this recent trend, which almost disappears in post-transfer incomes. Among the various government transfer programs, medical benefits play the greatest role in making the distribution less unequal.
Mendelian randomization evidence for the causal effects of socio-economic inequality on human longevity among Europeans
Chao-Jie Ye et al.
Nature Human Behaviour, August 2023, Pages 1357–1370
Abstract:
Human longevity correlates with socio-economic status, and there is evidence that educational attainment increases human lifespan. However, to inform meaningful health policies, we need fine-grained causal evidence on which dimensions of socio-economic status affect longevity and the mediating roles of modifiable factors such as lifestyle and disease. Here we performed two-sample Mendelian randomization analyses applying genetic instruments of education, income and occupation (n = 248,847 to 1,131,881) to estimate their causal effects and consequences on parental lifespan and self-longevity (n = 28,967 to 1,012,240) from the largest available genome-wide association studies in populations of European ancestry. Each 4.20 years of additional educational attainment were causally associated with a 3.23-year-longer parental lifespan independently of income and occupation and were causally associated with 30–59% higher odds of self-longevity, suggesting that education was the primary determinant. By contrast, each one-standard-deviation-higher income and one-point-higher occupation was causally associated with 3.06-year-longer and 1.29-year-longer parental lifespans, respectively, but not independently of the other socio-economic indicators. We found no evidence for causal effects of income or occupation on self-longevity. Mediation analyses conducted in predominantly European-descent individuals through two-step Mendelian randomization suggested that among 59 candidates, cigarettes per day, body mass index, waist-to-hip ratio, hypertension, coronary heart disease, myocardial infarction, stroke, Alzheimer’s disease, type 2 diabetes, heart failure and lung cancer individually played substantial mediating roles (proportion mediated, >10%) in the effect of education on specific longevity outcomes. These findings inform interventions for remediating longevity disparities attributable to socio-economic inequality.