To Covet or Not To Covet
Left Governmental Power and the Reduction of Inequalities in Western Europe (1871-2020)
Vincenzo Emanuele & Federico Trastulli
Perspectives on Politics, forthcoming
Abstract:
Despite considerable attention in the literature, existing studies analyzing the effect of left governmental power on inequalities suffer from three main limitations: a privileged focus on economic forms of inequality at the expense of political and social ones, inaccurate measurements of left governmental power, and the analyses' narrow time spans. This article addresses such concerns through a comparative longitudinal analysis where the impact of left governmental power on different measures of political, social, and economic inequalities is investigated in 20 Western European countries across the last 150 years. Data show that, consistent with previous literature, the Left in government has significantly reduced most forms of inequalities. However, the equalizing effect of the Left in government has decreased over time and has become not significant since the 1980s. The Left is today incapable of accomplishing its historical mission of reducing inequalities. The article discusses the rationale and implications of these findings.
Changing Opportunity: Sociological Mechanisms Underlying Growing Class Gaps and Shrinking Race Gaps in Economic Mobility
Raj Chetty et al.
NBER Working Paper, July 2024
Abstract:
We show that intergenerational mobility changed rapidly by race and class in recent decades and use these trends to study the causal mechanisms underlying changes in economic mobility. For white children in the U.S. born between 1978 and 1992, earnings increased for children from high-income families but decreased for children from low-income families, increasing earnings gaps by parental income ("class") by 30%. Earnings increased for Black children at all parental income levels, reducing white-Black earnings gaps for children from low-income families by 30%. Class gaps grew and race gaps shrank similarly for non-monetary outcomes such as educational attainment, standardized test scores, and mortality rates. Using a quasi-experimental design, we show that the divergent trends in economic mobility were caused by differential changes in childhood environments, as proxied by parental employment rates, within local communities defined by race, class, and childhood county. Outcomes improve across birth cohorts for children who grow up in communities with increasing parental employment rates, with larger effects for children who move to such communities at younger ages. Children's outcomes are most strongly related to the parental employment rates of peers they are more likely to interact with, such as those in their own birth cohort, suggesting that the relationship between children's outcomes and parental employment rates is mediated by social interaction. Our findings imply that community-level changes in one generation can propagate to the next generation and thereby generate rapid changes in economic mobility.
The Great Recession and the Widening Income Gap Between Alumni of Elite and Less Selective Universities
Russell Weinstein
American Economic Journal: Economic Policy, forthcoming
Abstract:
Using mobility report card data (Chetty et al., 2020a), I show the income gap between alumni of elite and less selective universities widened for cohorts graduating during the Great Recession. This is evident for mean and median incomes, and access to high earning percentiles. Results do not appear driven by differences in student composition, including parental income. Using a unique dataset of recruiting strategies for prestigious firms, I highlight one channel through which university selectivity may have a causal impact: high-wage firms concentrated their recruiting at elite universities during the recession. The results are informative for policies increasing lower-income students' representation at selective universities.
Impact of Skills in Early Adulthood on Lifetime Homeownership Disparities
Liyi Liu & Douglas McManus
Journal of Housing Economics, September 2024
Abstract:
This paper shows that skills acquired by early adulthood affect homeownership levels achieved later in life in important ways. The paper examines three sets of skills -- cognitive skills, as measured by the Armed Forces Qualifying Test (AFQT) score; non-cognitive skills (specifically, the degree to which people believe that they have control over the outcome of events in their lives), measured by the Rotter score; and social skills, using a Social score based on Deming (2017). Mediation analysis is used to identify both the direct and indirect effects of these skills, as captured by the three different types of scores, on homeownership. We show that the AFQT score measuring cognitive skills not only captures direct effects on the homeownership rate, but even larger indirect effects through the mediator variables -- education and income. AFQT scores in early adulthood are shown to be highly predictive of homeownership outcomes, explaining roughly one-quarter to one-third of the disparate outcomes between White, Black, and Hispanic households. We also examine the degree to which the AFQT, Rotter, and Social scores explain variation in homeownership rates over an individual's life cycle. The findings suggest that reducing disparities in educational outcomes would meaningfully contribute to reducing minority homeownership gaps.
The Myth of the Middle Class Squeeze: Employment and Income by Class in Six Western Countries, 1980-2020
Jad Moawad & Daniel Oesch
Comparative Political Studies, forthcoming
Abstract:
The public debate portrays the middle class as the big losers in recent decades, while people above and below seemingly fared better in terms of employment and income growth. This narrative is both conceptually and empirically flawed. Based on the Luxembourg Income Study 1980-2020, we show for France, Germany, Poland, Spain, the UK, and the US that middle-class employment expanded, while the working class shrank. The middle class also experienced consistently larger income gains than the working class over the past four decades. The disposable real incomes of working-class households in France, Germany or the US grew by less than half a percent per year, compared to 1% or more for the middle class. Cohort analysis also shows that the promise of doing better than one's parents held for the middle class, but vanished for the working class.
Upholding the social hierarchy: Agency as a predictor of the ideal level of economic inequality
Eva Moreno-Bella, Guillermo Willis & Miguel Moya
Social Psychology, May 2024, Pages 123-133
Abstract:
Many societies are becoming more economically unequal, and some people tend to be in favor of higher levels of economic inequality than others do. Traditionally, agency has been associated with high-status and high-power groups. In this research, we examined whether participants' agency led them to think there should be higher levels of economic inequality. In Study 1 (N = 191), we used a correlational design and found that participants' agency is associated with higher levels of ideal economic inequality. In Study 2 (N = 204), using an experimental design, we revealed that priming agency (vs. communion) leads to higher levels of ideal economic inequality. These findings extend prior evidence on the psychological effects of agency and illustrate the connection between agency and the ideal levels of economic inequality.
Where Income Becomes Wealth: How Redistribution Moderates the Association between Income and Wealth
Manuel Schechtl & Nora Waitkus
Socius: Sociological Research for a Dynamic World, July 2024
Abstract:
The authors study the role of redistributive policy in comparative research on the determinants of wealth. The authors argue that public redistribution affects the level of net wealth by moderating the household-level association of income and wealth. Drawing on microdata for 14 countries from the Luxembourg Wealth Study, and spending and revenue data from the Organisation for Economic Co-operation and Development, the authors use ordinary least squares models with country fixed effects. The authors find a positive moderation effect of social spending and a negative moderation effect of income taxation. Higher and lower labor incomes translate into higher and lower levels of wealth where income taxation is lower or social spending is higher. The authors complement these findings with panel information from the United States, providing further evidence supporting the cross-national results. In summary, public redistribution partially accounts for differences in the association of income and wealth across countries. The authors urge future research on the correlation of income and wealth to take public redistribution into account.
Good for the goose, bad for the gander? Corruption and income inequality
Jamie Bologna Pavlik & Justin Callais
Southern Economic Journal, forthcoming
Abstract:
We examine the relationship between corruption and income inequality across countries. While previous studies have explored this association at both an international and within-country level, we expand on this literature in two distinct ways. First, along with the most commonly utilized measure of inequality (Gini coefficients), we also examine income per-capita at each decile, along with top 1% and 5%, and the associated income shares. Second, we employ an empirical strategy that differs from the existing literature. Our primary results are estimated using matching methods, but we also supplement these results with a "doubly robust" difference-in-difference design. We find that a reduction in corruption increases incomes of the top 80% but does not significantly impact incomes of the bottom 20%, or the top 1% and 5%. We find some evidence of income growth amongst the top 1% and 5% following increases in corruption, but these results are inconsistent across estimations. Our results also suggest that accounting for the size of the informal sector matters a great deal in understanding the relationship between corruption and the distribution of income.
The social class test gap: A worldwide investigation of the role of academic anxiety and income inequality in standardized test score disparities
Nele Claes et al.
Journal of Educational Psychology, August 2024, Pages 871-888
Abstract:
We conducted three preregistered studies using the Organization for Economic Co-operation and Development Programme for International Student Assessment (PISA) data to provide a worldwide estimation of the standardized test gap between students from lower and higher social classes. We investigated: (a) the degree to which academic anxiety contributes to this gap and (b) the role of country-level income inequality in widening this gap. In Study 1, we used PISA 2003 data (250,000+ students from 41 countries) and demonstrated that anxiety accounts for approximately one-fifth of the performance gap between students with less educated parents and those with more educated parents. Unexpectedly, the social class test gap was weaker in more unequal countries than in more equal countries. In Studies 2a and 2b, we used the PISA 2012 and 2015 data (totaling over a million students from 65 countries and 72 countries, respectively) and differentiated the cultural dimension (parental education, cultural capital) and the economic dimension (economic capital) of social class. Regardless of the dimension, anxiety again accounted for between one-tenth and one-fifth of the performance gap between students from lower and higher social classes. Moreover, (a) the culturally based social class achievement gap was weaker in more unequal than in more equal countries, and (b) the economically based social class achievement gap was larger in more unequal than in more equal countries. Unexpectedly, we also find a robust association between national income inequality and academic anxiety across all three studies. Results are discussed in relation to the multidimensionality of social class and literature on the psychology of income inequality.
Housing Market Appreciation and the White-Black Wealth Gap
Joe LaBriola
Social Problems, forthcoming
Abstract:
Real house prices in the United States have risen by 55 percent over the last four decades, driving substantial wealth benefits to homeowners. However, research has not explored how this rise in house prices has affected White-Black wealth gaps, or the mechanisms that may underlie this relationship. Using geocoded longitudinal household-level wealth data from the Panel Study of Income Dynamics and tract-level house price index data, I estimate that housing market appreciation between 1984 and 2021 explains 70 percent of the increase in the median White-Black wealth gap over this period. I find that most of this effect is due to White-Black gaps in homeownership, with White-Black gaps in house values playing a smaller role. In contrast to recent findings about racialized housing markets, I do not find that gaps in neighborhood house price appreciation between White and Black homeowners contributed to White-Black wealth gaps in the 2000s and 2010s. These results highlight the importance of cumulative advantage processes in driving wealth inequalities and demonstrate how the legacies of institutional racism contribute to contemporary racial wealth gaps.
Automation and Rent Dissipation: Implications for Wages, Inequality, and Productivity
Daron Acemoglu & Pascual Restrepo
NBER Working Paper, June 2024
Abstract:
This paper studies the effects of automation in economies with labor market distortions that generate worker rents -- wages above opportunity cost -- in some jobs. We show that automation targets high-rent tasks, dissipating rents and amplifying wage losses from automation. It also reduces within-group wage dispersion for exposed groups. Automation-driven rent dissipation is inefficient and reduces (and could even negate) the productivity gains from automation. Using data for the US from 1980 to 2016, we find evidence of sizable rent dissipation and reduced within-group wage dispersion due to automation. Using these estimates and accounting for equilibrium effects, we estimate that automation accounts for 52% of the increase in between-group inequality in the US since 1980, with rent dissipation being responsible for a fifth of this contribution. We also estimate that inefficient rent dissipation offset 60-90% of the productivity gains from automation since 1980.