For Richer or Poorer
Income inequality and personality: Are less equal U.S. states less agreeable?
Robert de Vries, Samuel Gosling & Jeff Potter
Social Science & Medicine, forthcoming
Abstract:
Richard Wilkinson's ‘inequality hypothesis' describes the relationship between societal income inequality and population health in terms of the corrosive psychosocial effects of social hierarchy. An explicit component of this hypothesis is that inequality should lead individuals to become more competitive and self-focused, less friendly and altruistic. Together these traits are a close conceptual match to the opposing poles of the Big Five personality factor of Agreeableness; a widely used concept in the field of personality psychology. Based on this fact, we predicted that individuals living in more economically unequal U.S. states should be lower in Agreeableness than those living in more equal states. This hypothesis was tested in both ecological and multilevel analyses in the 50 states plus Washington DC, using a large Internet sample (N=674,885). Consistent with predictions, ecological and multilevel models both showed a negative relationship between state level inequality and Agreeableness. These relationships were not explained by differences in average income, overall state socio-demographic composition or individual socio-demographic characteristics.
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An Assessment of the Effectiveness of Anti-Poverty Programs in the United States
Yonatan Ben-Shalom, Robert Moffitt & John Karl Scholz
NBER Working Paper, May 2011
Abstract:
We assess the effectiveness of means-tested and social insurance programs in the United States. We show that per capita expenditures on these programs as a whole have grown over time but expenditures on some programs have declined. The benefit system in the U.S. has a major impact on poverty rates, reducing the percent poor in 2004 from 29 percent to 13.5 percent, estimates which are robust to different measures of the poverty line. We find that, while there are significant behavioral side effects of many programs, their aggregate impact is very small and does not affect the magnitude of the aggregate poverty impact of the system. The system reduces poverty the most for the disabled and the elderly and least for several groups among the non-elderly and non-disabled. Over time, we find that expenditures have shifted toward the disabled and the elderly, and away from those with the lowest incomes and toward those with higher incomes, with the consequence that post-transfer rates of deep poverty for some groups have increased. We conclude that the U.S. benefit system is paternalistic and tilted toward the support of the employed and toward groups with special needs and perceived deservingness.
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The Structure of Inequality and the Politics of Redistribution
Noam Lupu & Jonas Pontusson
American Political Science Review, forthcoming
Abstract:
Against the current consensus among comparative political economists, we argue that inequality matters for redistributive politics in advanced capitalist societies, but it is the structure of inequality, not the level of inequality, that matters. Our theory posits that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich. We test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution. In addition, we present survey evidence on preferences for redistribution among middle-income voters that is consistent with our theory and regression results indicating that left parties are more likely to participate in government when the structure of inequality is characterized by skew.
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Martin Fieder, Susanne Huber & Fred Bookstein
Journal of Biosocial Science, forthcoming
Abstract:
This study compares the effects of two distinct forms of human capital - income and education - on marital status and childlessness separately by sex in six different countries. Nearly 10 million individual records on individuals aged 16 to 50 were used from censuses from Brazil, Mexico, Panama, South Africa, USA and Venezuela dating from 2000 or later, to analyse the relationship between education, income and marital status and childlessness in men and women. Regarding income, the findings for both outcome variables are strongly consistent across all six countries. Highest-income males and lower-income females have the highest proportion of ever-married and the lowest proportion of childlessness (using a proxy for childlessness: own children in the household or not). There is no corresponding consistency of findings as regards education either between the sexes or among the countries. To conclude, a lower percentage of low-income men are selected by females, because for women male status and resources provided by men are important criteria in mate selection. Therefore a higher proportion of low-income men remain unmarried and childless. Thus selection seems to play a role in modern societies.
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Optimal Taxation with Rent-Seeking
Casey Rothschild & Florian Scheuer
NBER Working Paper, May 2011
Abstract:
Recent policy proposals have suggested taxing top incomes at very high rates on the grounds that some or all of the highest wage earners are engaged in socially unproductive or counterproductive activities, such as externality imposing speculation in the financial sector. To address this, we provide a model in which agents can choose between working in a traditional sector, where private and social products coincide, and a crowdable rent-seeking sector, where some or all of earned income reflects the capture of pre-existing output rather than increased production. We characterize Pareto optimal linear and non-linear income tax systems under the assumption that the social planner cannot or does not observe whether any given individual is a traditional worker or a rent-seeker. We find that optimal marginal taxes on the highest wage earners can remain remarkably modest even if all high earners are socially unproductive rent-seekers and the government has a strong intrinsic desire for progressive redistribution. Intuitively, taxing their effort at a lower rate stimulates their rent-seeking efforts, thereby keeping private returns for other potential rent-seekers low and discouraging further entry.
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A Short History of Global Inequality: The Past Two Centuries
Branko Milanovic
Explorations in Economic History, forthcoming
Abstract:
Using social tables, we make an estimate of global inequality (inequality among world citizens) in early 19th century. We then show that the level and composition of global inequality have changed over the last two centuries. The level has increased reaching a high plateau around 1950s, and the main determinants of global inequality have become differences in mean country incomes rather than inequalities within nations. The inequality extraction ratio (the percentage of total inequality that was extracted by global elites) has remained surprisingly stable, at around 70 percent of the maximum global Gini, during the last 100 years.
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Corruption and Income Inequality in the United States
Oguzhan Dincer & Burak Gunalp
Contemporary Economic Policy, forthcoming
Abstract:
In this study we analyze the effects of corruption on income inequality. Our analysis advances the existing literature in three ways. First, instead of using one of the corruption indices assembled by various investment risk services, we use an objective measure of corruption: the number of public officials convicted in a state for crimes related to corruption. Second, we minimize the problems which are likely to arise because of data incomparability by examining the differences in income inequality across the United States. Finally, we exploit both time series and cross-sectional variation in the data. We find robust evidence that an increase in corruption increases income inequality.
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Joseph Ferrie & Karen Rolf
NBER Working Paper, May 2011
Abstract:
The link between circumstances faced by individuals early in life (including those encountered in utero) and later life outcomes has been of increasing interest since the work of Barker in the 1970s on birth weight and adult disease. We provide such a life course perspective for the U.S. by following 45,000 U.S.-born males from the household where they resided before age 5 until their death and analyzing the link between the characteristics of their childhood environment - particularly, its socioeconomic status - and their longevity and specific cause of death. Individuals living before age 5 in lower SES households (measured by father's occupation and family home ownership) die younger and are more likely to die from heart disease than those living in higher SES households. The pathways potentially generating these effects are discussed.
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Association between Income and the Hippocampus
Jamie Hanson et al.
PLoS ONE, May 2011, e18712
Abstract:
Facets of the post-natal environment including the type and complexity of environmental stimuli, the quality of parenting behaviors, and the amount and type of stress experienced by a child affects brain and behavioral functioning. Poverty is a type of pervasive experience that is likely to influence biobehavioral processes because children developing in such environments often encounter high levels of stress and reduced environmental stimulation. This study explores the association between socioeconomic status and the hippocampus, a brain region involved in learning and memory that is known to be affected by stress. We employ a voxel-based morphometry analytic framework with region of interest drawing for structural brain images acquired from participants across the socioeconomic spectrum (n = 317). Children from lower income backgrounds had lower hippocampal gray matter density, a measure of volume. This finding is discussed in terms of disparities in education and health that are observed across the socioeconomic spectrum.
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Peter Butterworth et al.
Social Cognitive and Affective Neuroscience, forthcoming
Abstract:
This study examined whether middle-aged adults exposed to poverty in childhood or current financial hardship have detectable brain differences from those who have not experienced such adversity. Structural magnetic resonance imaging (MRI) was conducted as one aspect of the Personality and Total Health (PATH) through life study: a large longitudinal community survey measuring the health and well-being of three cohorts from south-eastern Australia. This analysis considers data from 431 middle-aged adults in the aged 44-48 years at the time of the interview. Volumetric segmentation was performed with the Freesurfer image analysis suite. Data on socio-demographic circumstances, mental health and cognitive performance were collected through the survey interview. Results showed that, after controlling for well-established risk factors for atrophy, adults who reported financial hardship had smaller left and right hippocampal and amygdalar volumes than those who did not report hardship. In contrast, there was no reliable association between hardship and intra-cranial volume or between childhood poverty and any of the volumetric measures. Financial hardship may be considered a potent stressor and the observed results are consistent with the view that hardship influences hippocampal and amygdalar volumes through hypothalamic-pituitary-adrenal axis function and other stress-related pathways.
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Family hardship, family instability, and cognitive development
Ingrid Schoon et al.
Journal of Epidemiology & Community Health, forthcoming
Background: Associations between the characteristics of the family environment, in particular poverty and family structure, and cognitive development are well established, yet little is known about the role of timing and accumulation of risk in early childhood. The aim of this paper is to assess the associations between income poverty, family instability and cognitive development in early childhood. In particular, it tests the relative role of family economic hardship compared with family instability in affecting cognitive functioning at the age of 5 years.
Methods: The study draws on data from the UK Millennium Cohort, linking data collected in infancy, age 3, and age 5 years. Cognitive ability was directly assessed at age 5 years with the British Ability Scales. Using regression models we examine associations between persistent income poverty, family transitions, and children's cognitive ability, controlling for family demographics and housing conditions, as well as child characteristics.
Results: The findings suggest that the experience of persistent economic hardship as well as very early poverty undermines cognitive functioning at 5 years of age. Family instability shows no significant association with cognitive functioning after controlling for family poverty, family demographics, housing and a set of control variables indicating child characteristics.
Conclusions: Persistent poverty is a crucial risk factor undermining children's cognitive development-more so than family instability.
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Socioeconomic status, a forgotten variable in lateralization development
David Boles
Brain and Cognition, June 2011, Pages 52-57
Abstract:
Socioeconomic status (SES), a variable combining income, education, and occupation, is correlated with a variety of social health outcomes including school dropout rates, early parenthood, delinquency, and mental illness. Several studies conducted in the 1970s and 1980s largely failed to report a relationship between SES and hemispheric asymmetry as measured by lateral differences in dichotic listening, tactile dot enumeration, and visual emotion and word recognition. However, none of the studies used asymmetry measures correcting for both ceiling and floor effects in accuracy, raising the question of whether lower and higher SES groups were comparable. Here the published data are reanalyzed using a laterality coefficient that corrects for such effects. The results are consistent across studies in revealing reduced lateralization in lower SES groups. Developmentally, this finding is consistent with either maturation delay or reduced functional specialization, or both. Suggestions are made for further research that include the use of behavioral asymmetry measures to screen tasks for structural and functional brain imaging.
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Intergenerational Redistribution in the Great Recession
Andrew Glover et al.
NBER Working Paper, April 2011
Abstract:
In this paper we construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of severe recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages, as observed in the data. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase assets at depressed prices. In our preferred calibration, asset prices decline more than twice as much as wages, consistent with the experience of the US economy in the Great Recession. A model recession is approximately welfare-neutral for households in the 20-29 age group, but translates into a large welfare loss of around 10% of lifetime consumption for households aged 70 and over.
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Christopher Dennis, Marshall Medoff & Kerri Stephens
Social Science Journal, forthcoming
Abstract:
This study finds that the effective state and local tax rate for the top 1% of income households as a percentage of the effective state and local tax rate for the bottom 20% of income households in 2002 is significantly influenced by whether a state has a multi-rate income tax, right-to-work laws, the liberalism of a state's electorate, the average tax burden in a state and past tax policy. Democratic Party strength in state government, Republican or Democratic Party institutional control of state government, change in real per capita income, a Democratic Governor and the change in the share of income going to the top 1% of income households are not significant predictors. The empirical results are identical for the top 2-5% of income households to the bottom 20% of income households.
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The Transformation of the Kibbutzim
Raymond Russell, Robert Hanneman & Shlomo Getz
Israel Studies, Summer 2011, Pages 109-126
Abstract:
The article provides an overview of the changes that have taken place in the kibbutzim since 1990 and assesses their significance. Between 1995 and 2010, most kibbutzim abandoned their traditional practice of sharing income "from each according to ability, to each according to need", and began paying differential salaries to members on the basis of the market value of their work. Academics, the kibbutz movement, and the Israeli government agree that kibbutzim that pay differential salaries are still kibbutzim, but they see them as kibbutzim of a new type, the so-called "renewed" kibbutz. More than a third of kibbutz members now work outside their kibbutz, while more than half of the labor performed inside the kibbutzim is now done by nonmembers. The number of kibbutz members has stagnated for decades, while nonmembers are the only portion of the kibbutz population that shows dynamic growth. So far, these developments have strained, but not yet terminated, the historic identities of these organizations as cooperatives, as communes, and as kibbutzim. More changes, however, are on the way. Both in renewed kibbutzim and the kibbutzim that remain "collective", most members now want to become owners of their homes and of individual capital stakes in the economic ventures of their kibbutzim, and many have begun to talk about transforming their kibbutz into a moshav or a municipality.
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Investigating the organizational sources of high-wage earnings growth and rising inequality
Caroline Hanley
Social Science Research, May 2011, Pages 902-916
Abstract:
Recent studies indicate that the growth of earnings inequality in the United States since the late 1970s reflects organizational changes in the process of earnings determination. Existing research primarily focuses on workplace changes that reduce earnings levels for middle- and low-wage workers despite the importance of high-wage gains for rising inequality. This paper investigates how organizational context affects the relationship between occupation and earnings, with a focus on high-wage occupations. The earnings associated with low-wage occupations do not vary across industry groups. By contrast, the earnings advantages associated with high-wage occupations vary across industry groups in relation to the industry's prevalence of performance pay practices. Pay initiatives that reward individuals for company performance explain much of the inter-industry variance in managerial and professional earnings slopes. The growth of performance-based pay represents an organizational change in earnings determination that may serve as a mechanism of high-wage earnings growth and rising inequality.
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Channels through Which Human Capital Inequality Influences Economic Growth
Amparo Castelló-Climent
Journal of Human Capital, December 2010, Pages 394-450
Abstract:
This paper empirically investigates the theoretical predictions of some of the channels through which human capital inequality may discourage investment and growth. In a cross section of countries over the period 1960-2000, findings reveal that, all other things being equal, a greater degree of human capital inequality increases fertility rates and reduces life expectancy, which in turn hampers the accumulation rates of human capital. This effect is reinforced in the countries where individuals find it difficult to access credit. Extensive sensitivity analyses show that the results are robust across specifications and are not driven by atypical observations, endogenous regressors, or unobservable heterogeneity.
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Anca Miron, Ruth Warner & Nyla Branscombe
British Journal of Social Psychology, June 2011, Pages 342-353
Abstract:
We tested whether differential appraisals of inequality are a function of the injustice standards used by different groups. A confirmatory standard of injustice is defined as the amount of evidence needed to arrive at the conclusion that injustice has occurred. Consistent with a motivational shifting of standards view, we found that advantaged and disadvantaged group members set different standards of injustice when judging the magnitude of gender (Study 1) and racial (Study 2) wage inequality. In addition, because advantaged and disadvantaged group members formed - based on their differential standards - divergent appraisals of wage inequality, they experienced differential desire to restore inter-group justice. We discuss the implications of promoting low confirmatory standards for changing perceptions of social reality and for motivating justice-restorative behaviour.
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A Non-Parametric Measure of Poverty Elasticity
Dustin Chambers & Shatakshee Dhongde
Review of Income and Wealth, forthcoming
Abstract:
We estimate the growth elasticity of poverty (GEP) using recently developed non-parametric panel methods and the most up-to-date and extensive poverty data from the World Bank, which exceeds 500 observations in size and represents more than 96 percent of the developing world's population. Unlike previous studies which rely on parametric models, we employ a non-parametric approach which captures the non-linearity in the relationship between growth, inequality, and poverty. We find that the growth elasticity of poverty is higher for countries with fairly equal income distributions, and declines in nations with greater income disparities. Moreover, when controlling for differences in estimation technique, we find that the reported values of the GEP in the literature (based on the World Bank's now-defunct 1993-PPP based poverty data) are systematically larger in magnitude than estimates based on the latest 2005-PPP based data.
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Udaya Wagle
Social Science Journal, January 2011, Pages 193-212
Abstract:
Michigan has undergone enormous labor market changes since the 1990s affecting employment, income, and poverty. This paper examines changes in poverty among working families and their policy-related and socio-demographic determinants between 1998/1999 and 2007/2008 in Michigan. Findings suggest the rates of ‘poverty' and ‘near poverty' to be between 5 and 19% among working families, with slightly higher rates for the latter period. Public transfers combining taxes and means-tested supports, albeit making some impact among poor families with children, were unable to lower these rates. While the major socio-demographic characteristics of poverty and near poverty including large families with children and young, never married, single mother, and immigrant householders apply to working families, the roles of gender, race, marital status, and education manifest through many policy-related variables such as work hours, wages, and transfer incomes. These findings have important implications for understanding working poverty in Michigan and beyond.
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Intergenerational Well-Being Mobility in Europe
José Alberto Molina, María Navarro & Ian Walker
Kyklos, May 2011, Pages 253-270
Abstract:
This paper provides evidence of the intergenerational mobility of economic wellbeing for the countries of the EU-15. We deal with the potential endogeneity of the transmission parameter by exploiting the presence of heteroskedasticity in a cross-sectional setting, using rank-order IV and conditional second moments estimation. OLS and panel (Fixed Effects and First Differences) models are also estimated, providing the upper and lower bounds for the true causal effect, not only for fathers and sons, but also for fathers and daughters, mothers and sons and mothers and daughters, in each of the sample countries. Our findings suggest that income well-being is much more persistent across generations in Southern European countries than in Finland, Denmark, the Netherlands and the UK.
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Andrew Steptoe et al.
Brain, Behavior, and Immunity, forthcoming
Abstract:
Low socioeconomic status (SES) may be associated with accelerated biological aging, but findings relating SES with telomere length have been inconsistent. We tested the hypotheses that shorter telomere length and telomerase activity would be related more robustly to education, an early life indicator of socioeconomic position, than to current indicators of socioeconomic circumstances. Healthy men and women aged 53-76 years from the Whitehall II epidemiological cohort provided blood samples from which telomere length was assessed in 448 and telomerase activity in 416. Educational attainment was classified into four levels, while household income and grade of employment were measured as indicators of current socioeconomic circumstances. Age, gender, blood pressure, glycated hemoglobin, high density lipoprotein cholesterol, smoking, body mass index and physical activity were included as covariates. We found that lower educational attainment was associated with shorter telomere length after controlling statistically for biological and behavioral covariates. Neither household income nor employment grade was related to telomere length. The association between telomere length and education remained significant after adjusting for current socioeconomic circumstances. In men, highest levels of telomerase activity were found in the lowest education group. We conclude that low SES defined in terms of education but not current socioeconomic circumstances is associated with shortened telomeres. Low educational attainment may be an indicator of long-term SES trajectories, and be associated with accumulated allostatic load resulting in telomere shortening. Education may also promote problem solving skills leading to reduced biological stress responsivity, with favorable consequences for biological aging.