Worth
More Unequal We Stand? Inequality Dynamics in the United States, 1967–2021
Jonathan Heathcote et al.
Review of Economic Dynamics, forthcoming
Abstract:
Heathcote et al. (2010) conducted an empirical analysis of several dimensions of inequality in the United States over the years 1967-2006, using publicly-available survey data. This paper expands the analysis, and extends it to 2021. We find that since the early 2000s, the college wage premium has stopped growing, and the race wage gap has stalled. However, the gender wage gap has kept shrinking. Both individual- and household-level income inequality have continued to rise at the top, while the cyclical component of inequality dominates dynamics below the median. Inequality in consumption expenditures has remained remarkably stable over time. Income pooling within the family and redistribution by the government have enormous impacts on the dynamics of household-level inequality, with the role of the family diminishing and that of the government growing over time. In particular, largely due to generous government transfers, the COVID recession has been the first downturn in fifty years in which inequality in disposable income and consumption actually declined.
The Consequences of Revealing First-Generational Status
Peter Belmi et al.
Organization Science, forthcoming
Abstract:
College is regarded as the great equalizer. People with four-year degrees expect to reap the rewards of their education. This paper examines the pivotal transition from college to the labor market. How do candidates fare when they reveal to prospective employers that they are “first-gen”? Based on the literature, one may advance two competing predictions. One perspective predicts the possibility of a first-gen advantage. This view predicts that revealing one’s first-gen status can help applicants, by making them seem motivated, committed, responsible, and hardworking. It also makes for a compelling narrative; many Americans love stories of “bootstrapped” success. In contrast, a competing perspective predicts the possibility of a first-generation disadvantage. According to this view, there are forces that block decision makers from recognizing the strengths of first-gen students. We tested these two perspectives with an audit study (n = 1,783) and four follow-up studies (n = 4,920). The results supported the first-gen disadvantage hypothesis. Even in the mainstream labor market, first-gen students were evaluated less favorably. We traced this bias to the impact of one possible mechanism: deficit thinking. Despite overcoming hardships, first-gen students were often viewed through the lens of deficits. As a consequence, they were often denied opportunities to gain entry into organizations. Importantly, we found that a mindset shift can help ameliorate the problem. When we nudged decision makers to adopt a strengths-based lens, they became more receptive to hiring first-gen applicants. This work extends knowledge on the mechanisms that drive social class gaps in hiring. It also invites a reassessment of how to study social class in organizations. Deficit models dominate the study of social class. However, as we demonstrated, focusing on deficits can exacerbate inequality. It is important to consider people’s experiences and humanity holistically.
Outsourcing, Occupationally Homogeneous Employers, and Wage Inequality in the United States
Elizabeth Weber Handwerker
Journal of Labor Economics, forthcoming
Abstract:
This paper develops measures of the occupational homogeneity of employers as indicators of outsourcing. Findings are threefold. First, wages are strongly related to occupational homogeneity, particularly for workers in low-wage occupations. Second, by some measures, workers -- particularly those in higher-wage occupations -- saw their employing establishments become more occupationally homogeneous during 2004-2019. Third, changes in the occupational homogeneity of workplaces contributed to growing wage inequality among workers over the first part of this period. The growing sorting and segregation by occupation of workers into different employers is an important part of wage inequality.
A Methodologically Consistent Measure of Income Inequality in the United States, 1917 to 2020
Vincent Geloso & Phillip Magness
George Mason University Working Paper, August 2023
Abstract:
We present a new series for top income concentrations in the United States, using a consistent data construction methodology for the entire range of available data. This is meant to connect efforts that have separately considered pre-1960 and post-1960 inequality measures. Our series improves upon the series of Piketty and Saez (2003), correcting for data discontinuities induced by arbitrary choices that introduce distortions to their fiscal income denominator between the mid-1980s and the present. We then link our series with previous corrections to the Piketty-Saez series, creating a yearly estimate of top income concentration from 1917 to 2020. The results indicate a more tempered rise in inequality in recent decades than the previous literature.
Leveling the playing field: The distributional impact of maximum- and minimum-level contracts on player compensation
Scott Kaplan
Contemporary Economic Policy, forthcoming
Abstract:
How does the presence of maximum- and minimum-level contract restrictions impact (i) superstar compensation and (ii) the distribution of compensation across an industry? Using ticket price and observed player talent data from the National Basketball Association (NBA), I estimate expected salaries for each player as well as their value to the NBA as a whole. I find the ratio of actual to expected salary is 2.8%-56.9% for the most talented players, resulting in subsidization to less talented players. The findings also suggest the most talented players generate significantly more value to the NBA than their actual and expected salaries.
Rubbing Shoulders: Class Segregation in Daily Activities
Maxim Massenkoff & Nathan Wilmers
MIT Working Paper, July 2023
Abstract:
We use location data to study activity and encounters across class lines. Low-income and especially high-income individuals are socially isolated: more likely than other income groups to encounter people from their own social class. Using simple counterfactual exercises, we study the causes. While some industries cater mainly to low or high-income groups (for example, golf courses and wineries), industry alone explains only a small share of isolation. People are most isolated when they are close to home, and the tendency to go to nearby locations explains about one-third of isolation. Using our uniquely detailed data, we show that brands, combined with distance, explain about half the isolation of the rich. Casual restaurant chains, like Olive Garden and Applebee's, have the largest positive impact on cross-class encounters through both scale and their diversity of visitors. Dollar stores and local pharmacies like CVS deepen isolation. Among publicly-funded spaces, libraries and parks are more redistributive than museums and historical sites. And, despite prominent restrictions on chain stores in some large US cities, chains are more class diverse than independent stores. The mix of establishments in a neighborhood is strongly associated with cross-class Facebook friendships (Chetty et al., 2022). The results uncover how policies that support certain public and private spaces might impact the connections that form across class divides.
Incentives, globalization, and redistribution
Antoine Ferey, Andreas Haufler & Carlo Perroni
Journal of Public Economics, August 2023
Abstract:
We offer a new explanation for why taxes have become less redistributive in many countries while the concentration of incomes has increased. Our argument is based on the prevalence of incentive contracts in modern economies, in conjunction with increased product market integration. Globalization widens the spread of project returns and makes contract choices more responsive to tax changes. This can result in a lower optimal income tax rate while simultaneously increasing the income share of top earners. These results are confirmed in a calibrated version of our model based on U.S. income data.
Decoupling genetics from attainments: The role of social environments
Jason Fletcher
Economics & Human Biology, August 2023
Abstract:
This paper examines the extent to which growing up in a socially mobile environment might decouple genetic endowments related to educational attainment with actual attainments. Many models of intergenerational transmission of advantage contain both a transmission channel through endowments (i.e. genetics) from parents to children as well as from parental investments and “luck”. Indeed, many scholars consider the intergenerational links due to the transmission of genetically-based advantage to place a lower bound on plausible levels of social mobility -- genetics may be able to “lock in” advantage across generations. This paper explores this idea by using genetic measurements in the Health and Retirement Study to examine potential interactions between social environments and genetics related to attainments. The results suggest evidence of gene environment interactions: children born in high mobility states have lower genetic penetrance -- the interaction between state-level mobility and the polygenic score for education is negative. These results suggest a need to incorporate gene-environment interactions in models of attainment and mobility and to pursue the mechanisms behind the interactions.
What They Have but Also Who They Are: Avarice, Elitism, and Public Support for Taxing the Rich
John Kane & Benjamin Newman
Public Opinion Quarterly, Summer 2023, Pages 402-414
Abstract:
Scholarship evaluating public support for redistribution has emphasized that stereotypical perceptions of low-income people inform citizens’ willingness to redistribute wealth to the poor. Less understood, however, is the extent to which stereotypical perceptions of high-income people lead to greater willingness to raise taxes on high-income individuals. These perceptions likely involve resource-based considerations (i.e., what rich people have). However, following recent scholarship, perceptions of the wealthy may also involve more fundamental, trait-based considerations (i.e., who the rich are as people). In this Research Note, we isolate causal effects, utilizing conjoint experiments, of both resource-based and character-based attributes of the rich on support for taxing wealthy people. We find evidence that two character traits -- avarice and elitism -- significantly increase support for raising taxes on wealthy individuals, and this pattern appears to be the case even among groups generally opposed to redistribution (e.g., Republicans and conservatives). We conclude that, while resource-based considerations remain important, the scholarly literature on redistribution may also benefit from a deeper understanding of the trait-based foundations of public attitudes toward taxing the wealthy.