Some animals are more equal
Inequality in nature and society
Marten Scheffer et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
Most societies are economically dominated by a small elite, and similarly, natural communities are typically dominated by a small fraction of the species. Here we reveal a strong similarity between patterns of inequality in nature and society, hinting at fundamental unifying mechanisms. We show that chance alone will drive 1% or less of the community to dominate 50% of all resources in situations where gains and losses are multiplicative, as in returns on assets or growth rates of populations. Key mechanisms that counteract such hyperdominance include natural enemies in nature and wealth-equalizing institutions in society. However, historical research of European developments over the past millennium suggests that such institutions become ineffective in times of societal upscaling. A corollary is that in a globalizing world, wealth will inevitably be appropriated by a very small fraction of the population unless effective wealth-equalizing institutions emerge at the global level.
Who Becomes an Inventor in America? The Importance of Exposure to Innovation
Alexander Bell et al.
NBER Working Paper, November 2017
Abstract:
We characterize the factors that determine who becomes an inventor in America by using de-identified data on 1.2 million inventors from patent records linked to tax records. We establish three sets of results. First, children from high-income (top 1%) families are ten times as likely to become inventors as those from below-median income families. There are similarly large gaps by race and gender. Differences in innate ability, as measured by test scores in early childhood, explain relatively little of these gaps. Second, exposure to innovation during childhood has significant causal effects on children's propensities to become inventors. Growing up in a neighborhood or family with a high innovation rate in a specific technology class leads to a higher probability of patenting in exactly the same technology class. These exposure effects are gender-specific: girls are more likely to become inventors in a particular technology class if they grow up in an area with more female inventors in that technology class. Third, the financial returns to inventions are extremely skewed and highly correlated with their scientific impact, as measured by citations. Consistent with the importance of exposure effects and contrary to standard models of career selection, women and disadvantaged youth are as under-represented among high-impact inventors as they are among inventors as a whole. We develop a simple model of inventors' careers that matches these empirical results. The model implies that increasing exposure to innovation in childhood may have larger impacts on innovation than increasing the financial incentives to innovate, for instance by cutting tax rates. In particular, there are many “lost Einsteins” — individuals who would have had highly impactful inventions had they been exposed to innovation.
Every Little Bit Counts: The Impact of High-Speed Internet on the Transition to College
Lisa Dettling, Sarena Goodman & Jonathan Smith
Review of Economics and Statistics, forthcoming
Abstract:
This paper examines whether high-speed Internet affects students’ college applications. Our analysis links the diffusion of residential broadband to the testing and application outcomes of millions of PSAT- and SAT-takers and reveals that students with broadband in their zip code perform better on the SAT and apply to a higher number and more expansive set of colleges. While the availability of broadband generally improved applications to college, the effects appear to be concentrated among high-SES students, suggesting that the new technology may have increased pre-existing inequities.
Digital Innovation and the Distribution of Income
Dominique Guellec & Caroline Paunov
NBER Working Paper, November 2017
Abstract:
Income inequalities have increased in most OECD countries over the past decades; particularly the income share of the top 1%. In this paper we argue that the growing importance of digital innovation – new products and processes based on software code and data – has increased market rents, which benefit disproportionately the top income groups. In line with Schumpeter’s vision, digital innovation gives rise to ”winner-take-all” market structures, characterized by higher market power and risk than was the case in the previous economy of tangible products. The cause for these new market structures is digital non-rivalry, which allows for massive economies of scale and reduces costs of innovation. The latter stimulates higher rates of creative destruction, leading to higher risk as only marginally superior products can take over the entire market, hence rendering market shares unstable. Instability commands risk premia for investors. Market rents accrue mainly to investors and top managers and less to the average workers, hence increasing income inequality. Market rents are needed to incentivize innovation and compensate for its costs, but beyond a certain level they become detrimental. Public policy may stimulate innovation by reducing ex ante the market conditions which favor rent extraction from anti-competitive practices.
Living With Inequality: Neighborhood Income Diversity and Perceptions of the Income Gap
Scott Minkoff & Jeffrey Lyons
American Politics Research, forthcoming
Abstract:
This article explores whether the places where people live — and specifically the diversity of incomes where people live — influence views about income inequality. Using a unique survey of New York City that contains geographic identifiers and questions about attitudes toward inequality, coupled with a rich array of Census data, we assess the degree to which the income diversity within spatially customized neighborhood boundaries influences beliefs about inequality. We find consistent evidence that attitudes about inequality are influenced by the places where people live — those who are exposed to more income diversity near their homes perceive larger gaps between the rich and everybody else, and are more likely to believe that the gap should be smaller. Moreover, this effect appears to be especially pronounced among those with lower educational attainment and at either end of the income spectrum.
Job Polarization and Structural Change
Zsófia Bárány & Christian Siegel
American Economic Journal: Macroeconomics, forthcoming
Abstract:
We document that job polarization — contrary to the consensus — has started as early as the 1950s in the US: middle-wage workers have been losing both in terms of employment and average wage growth compared to low- and high-wage workers. Given that polarization is a long-run phenomenon and closely linked to the shift from manufacturing to services, we propose a structural change driven explanation, where we explicitly model the sectoral choice of workers. Our simple model does remarkably well not only in matching the evolution of sectoral employment, but also of relative wages over the past fifty years.
Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?
Edward Wolff
NBER Working Paper, November 2017
Abstract:
Asset prices plunged between 2007 and 2010 but then rebounded from 2010 to 2016. The most telling finding is that median wealth plummeted by 44 percent over years 2007 to 2010. The inequality of net worth, after almost two decades of little movement, went up sharply from 2007 to 2010, and relative indebtedness for the middle class expanded. The sharp fall in median net worth and the rise in overall wealth inequality over these years are largely traceable to the high leverage of middle class families and the high share of homes in their portfolio. Mean and median wealth rebounded from 2010 to 2016, by 17 and 28 percent, respectively. While mean wealth surpassed its previous peak in 2007, median wealth was still down by 34 percent. More than 100 percent of the recovery in both was due to a high return on wealth but this factor was offset by negative savings. Relative indebtedness continued to fall for the middle class from 2010 to 2016, and wealth inequality increased somewhat. The racial and ethnic disparity in wealth holdings widened considerably between 2007 and 2016, and the wealth of households under age 45 declined in relative terms.
Income Inequality and Household Labor
Daniel Schneider & Orestes Hastings
Social Forces, forthcoming
Abstract:
Income inequality has increased dramatically in the United States since the mid-1970s. This remarkable change in the distribution of household income has spurred a great deal of research on the social and economic consequences of exposure to high inequality. However, the empirical record on the effects of income inequality is mixed. In this paper, we suggest that previous research has generally overlooked a simple but important pathway through which inequality might manifest in daily life: inequality shapes the ability of women to outsource domestic labor by hiring others to perform it. One important venue where such dynamics might then manifest is in time spent on housework, and in particular in the time divide in housework between women of high and low socio-economic status. We combine micro-data from the 2003–2013 American Time Use Survey with area-level data on income inequality to show that the class divide in housework time between women with a college degree and from high-earning households and women of lower socio-economic status is wider in more unequal places. We further assess whether this gap can be explained by domestic outsourcing by combining micro-data from the 2003–2013 Consumer Expenditure Survey with area-level data on income inequality and show that the gap in spending for household services between households of high and low socio-economic status also increases in contexts of higher inequality.
Electoral Competition and Policy Feedback Effects
Carlo Prato
Journal of Politics, forthcoming
Abstract:
Some government policies can systematically influence citizens’ acquisition of economic information. Since voters evaluate policy platforms in light of this information, politicians might exploit these policy feedback effects to shape voter’s future policy preferences to their advantage. We illustrate this logic in the context of government subsidies to property ownership. Using an extension of the Romer-Meltzer-Richard model with imperfect information about the economy, we show how subsidies to ownership of real estate — such as mortgage interest deductions or discounted sales of public housing — produce an electorate that is systematically less favorable to redistributive taxation. The resulting political complementarity between home subsidies and fiscal conservatism is consistent with several empirical regularities.
Just Don’t Call it a Tax! Framing in an Experiment on Voting and Redistribution
Jan Lorenz, Fabian Paetzel & Markus Tepe
Journal of Experimental Political Science, Winter 2017, Pages 183-194
Abstract:
Utilizing a simplified version of the Meltzer–Richard redistribution mechanism, we designed a laboratory experiment to test whether it matters if voters were asked to decide on a tax rate or a minimum income, leaving the redistribution mechanism itself unchanged. Framing the vote about redistribution as a decision about a minimal income increases the individually and ideally preferred level of redistribution. This effect outlives the groups’ deliberation processes and leads to the implementation of a higher level of redistribution.
Patience moderates the class cleavage in demand for redistribution
Austin Horng-En Wang
Social Science Research, forthcoming
Abstract:
Previous studies on class voting have yielded mixed results linking income and demand for redistribution. Why do some poor people oppose redistribution, while some rich people support it? This article argues that an individual's level of patience, an important personal characteristic that influences how people calculate immediate and distinct outcomes, may moderate the effect of class on redistributive preference. In a one-shot game, redistribution between the rich and the poor is zero sum. When people extend their time horizons, however, the poor see the possibility of upward mobility, while the rich emphasize future losses, such as unemployment and economic instability. Consistent with the hypotheses, analyses of the 2014 Cooperative Congressional Election Study and a representative Taiwanese dataset from 2016 reveal a clear class cleavage in demand for redistribution among impatient poor and rich respondents, but the cleavage between their patient counterparts diminished. This pattern of convergence extends previous studies on upward mobility and risk perception theory.
Socioeconomic status and genetic influences on cognitive development
David Figlio et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
Accurate understanding of environmental moderation of genetic influences is vital to advancing the science of cognitive development as well as for designing interventions. One widely reported idea is increasing genetic influence on cognition for children raised in higher socioeconomic status (SES) families, including recent proposals that the pattern is a particularly US phenomenon. We used matched birth and school records from Florida siblings and twins born in 1994–2002 to provide the largest, most population-diverse consideration of this hypothesis to date. We found no evidence of SES moderation of genetic influence on test scores, suggesting that articulating gene-environment interactions for cognition is more complex and elusive than previously supposed.
Social preferences of future physicians
Jing Li, William Dow & Shachar Kariv
Proceedings of the National Academy of Sciences, 28 November 2017, Pages E10291–E10300
Abstract:
We measure the social preferences of a sample of US medical students and compare their preferences with those of the general population sampled in the American Life Panel (ALP). We also compare the medical students with a subsample of highly educated, wealthy ALP subjects as well as elite law school students and undergraduate students. We further associate the heterogeneity in social preferences within medical students to the tier ranking of their medical schools and their expected specialty choice. Our experimental design allows us to rigorously distinguish altruism from preferences regarding equality–efficiency tradeoffs and accurately measure both at the individual level rather than pooling data or assuming homogeneity across subjects. This is particularly informative, because the subjects in our sample display widely heterogeneous social preferences in terms of both their altruism and equality–efficiency tradeoffs. We find that medical students are substantially less altruistic and more efficiency focused than the average American. Furthermore, medical students attending the top-ranked medical schools are less altruistic than those attending lower-ranked schools. We further show that the social preferences of those attending top-ranked medical schools are statistically indistinguishable from the preferences of a sample of elite law school students. The key limitation of this study is that our experimental measures of social preferences have not yet been externally validated against actual physician practice behaviors. Pending this future research, we probed the predictive validity of our experimental measures of social preferences by showing that the medical students choosing higher-paying medical specialties are less altruistic than those choosing lower-paying specialties.