Life isn't fair
Kimmo Eriksson & Brent Simpson
Social Psychological and Personality Science, forthcoming
Abstract:
In three web-based experiments, we show that both actual poverty and experimentally induced (imagined) poverty create a preference for greater inequality. Study 1, a cross-national comparison between Americans and Swedes, showed that respondents who were actually poor and those who were experimentally induced to imagine that they were poor tended to express a heightened preference for greater inequality, and for a higher proportion of poor citizens. Study 2 replicated the effects using different procedures. Study 3 showed that imagining oneself being poor increases preferences for a greater proportion of poor people, but imagining oneself being rich does not increase preferences for a greater proportion of rich people. This poverty prefers company effect might affect support for policies aiming at reducing the number of poor people.
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Wealth and the Inflated Self: Class, Entitlement, and Narcissism
Paul Piff
Personality and Social Psychology Bulletin, forthcoming
Abstract:
Americans may be more narcissistic now than ever, but narcissism is not evenly distributed across social strata. Five studies demonstrated that higher social class is associated with increased entitlement and narcissism. Upper-class individuals reported greater psychological entitlement (Studies 1a, 1b, and 2) and narcissistic personality tendencies (Study 2), and they were more likely to behave in a narcissistic fashion by opting to look at themselves in a mirror (Study 3). Finally, inducing egalitarian values in upper-class participants decreased their narcissism to a level on par with their lower-class peers (Study 4). These findings offer novel evidence regarding the influence of social class on the self and highlight the importance of social stratification to understanding basic psychological processes.
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Population Size, Network Density, and the Emergence of Inherited Inequality
Reuben Thomas & Noah Mark
Social Forces, forthcoming
Abstract:
The inheritance of social standing from one generation to the next did not occur for most of the time that humans have lived, but became common only once human societies grew beyond a certain size. This paper offers a theory of how social inheritance may have resulted from this change in size, simply through the accompanying decrease in social network density. This decrease brought about differentiation in social network positions, creating structural advantages and disadvantages in group decision processes. As these processes determined social worth and leadership in societies, social network position became integral to social status and political prestige. And because network position tends to be passed from parent to child, social status came to be passed on, not (at first) through the inheritance of power or property, but through the inheritance of social connections. To illustrate the relationship between structural advantage and network density, we use a mathematical model of social influence in an array of small networks, as well as larger random networks to show how network position becomes increasingly determinant of social status as density decreases and network positions become increasingly differentiated. We use these results to further predict the conditions under which "who you know" matters more than "what you know."
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Josh Bivens & Lawrence Mishel
Journal of Economic Perspectives, Summer 2013, Pages 57-78
Abstract:
The debate over the extent and causes of rising inequality of American incomes and wages has now raged for at least two decades. In this paper, we will make four arguments. First, the increase in the incomes and wages of the top 1 percent over the last three decades should be interpreted as driven largely by the creation and/or redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences. This rise in rents accruing to the top 1 percent could be the result of increased opportunities for rent-shifting, increased incentives for rent-shifting, or a combination of both. Second, this rise in incomes at the very top has been the primary impediment to having growth in living standards for low- and moderate-income households approach the growth rate of economy-wide productivity. Third, because this rise in top incomes is largely driven by rents, there is the potential for checking (or even reversing) this rise through policy measures with little to no adverse impact on overall economic growth. Lastly, this analysis suggests two complementary approaches for policymakers wishing to reverse the rise in the top 1 percent's share of income: dismantling the institutional sources of their increased ability to channel rents their way and/or reducing the return to this rent-seeking by significantly increasing marginal rates of taxation on high incomes.
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From the Ephemeral to the Enduring: How Approach-Oriented Mindsets Lead to Greater Status
Gavin Kilduff & Adam Galinsky
Journal of Personality and Social Psychology, forthcoming
Abstract:
We propose that the psychological states individuals bring into newly formed groups can produce meaningful differences in status attainment. Three experiments explored whether experimentally created approach-oriented mindsets affected status attainment in groups, both immediately and over time. We predicted that approach-oriented states would lead to greater status attainment by increasing proactive behavior. Furthermore, we hypothesized that these status gains would persist longitudinally, days after the original mindsets had dissipated, due to the self-reinforcing behavioral cycles the approach-oriented states initiated. In Experiment 1, individuals primed with a promotion focus achieved higher status in their newly formed groups, and this was mediated by proactive behavior as rated by themselves and their teammates. Experiment 2 was a longitudinal experiment and revealed that individuals primed with power achieved higher status, both immediately following the prime and when the groups were reassembled 2 days later to work on new tasks. These effects were mediated by independent coders' ratings of proactive behavior during the first few minutes of group interaction. Experiment 3 was another longitudinal experiment and revealed that priming happiness led to greater status as well as greater acquisition of material resources. Importantly, these immediate and longitudinal effects were independent of the effects of a number of stable dispositional traits. Our results establish that approach-oriented psychological states affect status attainment, over and above the more stable characteristics emphasized in prior research, and provide the most direct test yet of the self-reinforcing nature of status hierarchies. These findings depict a dynamic view of status organization in which the same group may organize itself differently depending on members' incoming psychological states.
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A Cross-Cultural Study of Noblesse Oblige in Economic Decision-Making
Laurence Fiddick et al.
Human Nature, September 2013, Pages 318-335
Abstract:
A cornerstone of economic theory is that rational agents are self-interested, yet a decade of research in experimental economics has shown that economic decisions are frequently driven by concerns for fairness, equity, and reciprocity. One aspect of other-regarding behavior that has garnered attention is noblesse oblige, a social norm that obligates those of higher status to be generous in their dealings with those of lower status. The results of a cross-cultural study are reported in which marked noblesse oblige was observed on a reciprocal-contract decision-making task. Participants from seven countries that vary along hierarchical and individualist/collectivist social dimensions were more tolerant of non-reciprocation when they adopted a high-ranking perspective compared with a low-ranking perspective.
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Michael Bang Petersen et al.
Political Psychology, forthcoming
Abstract:
Do politically irrelevant events influence important policy opinions? Previous research on social welfare attitudes has emphasized the role of political factors such as economic self-interest and ideology. Here, we demonstrate that attitudes to social welfare are also influenced by short-term fluctuations in hunger. Using theories in evolutionary psychology, we predict that hungry individuals will be greedier and take more resources from others while also attempting to induce others to share by signaling cooperative intentions and expressing support for sharing, including evolutionarily novel forms of sharing such as social welfare. We test these predictions using self-reported hunger data as well as comparisons of subjects who participated in relevant online studies before and after eating lunch. Across four studies collected in two different welfare regimes - the United Kingdom and Denmark - we consistently find that hungry individuals act in a greedier manner but describe themselves as more cooperative and express greater support for social welfare.
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Inequality, the Urban-Rural Gap and Migration
Alwyn Young
Quarterly Journal of Economics, forthcoming
Abstract:
Using population and product consumption data from the Demographic and Health Surveys I construct comparable measures of inequality and migration for 65 countries, including some of the poorest countries in the world. I find that the urban-rural gap accounts for 40% of mean country inequality and much of its cross-country variation. One out of every four or five individuals raised in rural areas moves to urban areas as a young adult, where they earn much higher incomes than non-migrant rural permanent residents. Equally, one out of every four or five individuals raised in urban areas moves to rural areas as a young adult, where they earn much lower incomes than their non-migrant urban cousins. These flows and relative incomes are suggestive of a world where the population sorts itself geographically on the basis of its human capital and skill. I show that a simple model of this sort explains the urban-rural gap in living standards.
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Income Inequality, Equality of Opportunity, and Intergenerational Mobility
Miles Corak
Journal of Economic Perspectives, Summer 2013, Pages 79-102
Abstract:
My focus is on the degree to which increasing inequality in the high-income countries, particularly in the United States, is likely to limit economic mobility for the next generation of young adults. I discuss the underlying drivers of opportunity that generate the relationship between inequality and intergenerational mobility. The goal is to explain why America differs from other countries, how intergenerational mobility will change in an era of higher inequality, and how the process is different for the top 1 percent. I begin by presenting evidence that countries with more inequality at one point in time also experience less earnings mobility across the generations, a relationship that has been called "The Great Gatsby Curve." The interaction between families, labor markets, and public policies all structure a child's opportunities and determine the extent to which adult earnings are related to family background -- but they do so in different ways across national contexts. Both cross-country comparisons and the underlying trends suggest that these drivers are all configured most likely to lower, or at least not raise, the degree of intergenerational earnings mobility for the next generation of Americans coming of age in a more polarized labor market. This trend will likely continue unless there are changes in public policy that promote the human capital of children in a way that offers relatively greater benefits to the relatively disadvantaged.
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The Economic Origins of the Evil Eye Belief
Boris Gershman
American University Working Paper, July 2013
Abstract:
The evil eye belief is a widespread superstition according to which envious people can cause harm by a mere glance at coveted objects or their owners. This paper argues that such belief originated and persisted as a useful heuristic under conditions in which destructive envy represents a real threat and envy-avoidance behavior, effectively prescribed by the evil eye belief, is a proper response to this threat. Historically, increasing wealth differentiation raised the risk of envy-induced destructive behavior leading to the emergence and spread of the evil eye belief. Evidence from small-scale preindustrial societies shows that there is indeed a robust positive association between the incidence of the belief and measures of wealth inequality, controlling for continental fixed effects and potential confounding factors such as patterns of spatial and cross-cultural diffusion and various dimensions of early economic development. Furthermore, the evil eye belief is more likely to be present in agro-pastoral societies that tend to sustain higher levels of inequality and where vulnerable material wealth plays a dominant role in the subsistence economy.
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Capital is Back: Wealth-Income Ratios in Rich Countries 1700-2010
Thomas Piketty & Gabriel Zucman
Paris School of Economics Working Paper, July 2013
Abstract:
How do aggregate wealth-to-income ratios evolve in the long run and why? We address this question using 1970-2010 national balance sheets recently compiled in the top eight developed economies. For the U.S., U.K., Germany, and France, we are able to extend our analysis as far back as 1700. We find in every country a gradual rise of wealth-income ratios in recent decades, from about 200-300% in 1970 to 400-600% in 2010. In effect, today's ratios appear to be returning to the high values observed in Europe in the eighteenth and nineteenth centuries (600-700%). This can be explained by a long run asset price recovery (itself driven by changes in capital policies since the world wars) and by the slowdown of productivity and population growth, in line with the Beta = s/g Harrod-Domar-Solow formula. That is, for a given net saving rate s = 10%, the long run wealth-income ratio Beta is about 300% if g = 3% and 600% if g = 1.5%. Our results have important implications for capital taxation and regulation and shed new light on the changing nature of wealth, the shape of the production function, and the rise of capital shares.
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Melissa Holly Mahoney
Review of Income and Wealth, forthcoming
Abstract:
This article explores how inequities in public K-12 school spending impact the distribution of economic well-being across American households with public school students in 1989 and 2000. Adapting concepts from the public finance literature, I explore the impact of school spending on the vertical and horizontal equity and its impact relative to other types of public spending on social programs and taxation. Conventionally, vertical equity refers to the size of the income gaps between households. Horizontal equity refers to the ranking of households along the income distribution with any change in ranks producing horizontal inequity. My main findings show that school spending, when converted into a component of income, served to reduce extended-income inequality through improvements in vertical equity without the discriminatory implications of exacerbating horizontal inequity across households. Additionally, this impact was at least as large as that of spending on other social programs. This finding bolsters standard arguments for equity and progressivity of school finance across students.
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Occupations and British Wage Inequality, 1970s-2000s
Mark Williams
European Sociological Review, August 2013, Pages 841-857
Abstract:
Although there was a ‘massive rise' in British wage inequality, relatively little is known about the relationship between occupations and growing British wage inequality. Since sociologists traditionally have tended to place a great deal of emphasis on occupations, we might expect them to play a key role in accounting for trends in overall British wage inequality. More recent strands of stratification theory, however, have challenged the idea that occupations structure economic inequalities as well as they once did, and argue that the link between occupations and wages might have been weakening; instead predicting that growing wage inequality mostly occurs within occupations. We decompose trends in British wage inequality into between-occupation and within-occupation components and show that, although most wage inequality is within occupations, it is inequality between occupations that accounts for the lion's share of growing wage inequality. Trends in between-occupation inequality cannot be ‘explained away' by fundamental labour market changes such as rising educational attainment and the decline in collective bargaining, indicating occupations really did structure the ‘massive rise' in wage inequality. We also demonstrate what the rise in between-occupation inequality can be more or less described as growing between-class inequality.
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Economic Development as Opportunity Equalization
John Roemer
World Bank Economic Review, forthcoming
Abstract:
Economic development should be conceived of as the degree to which an economy has implemented an efficient and just distribution of economic resources. The ubiquitous measure of GDP per capita reflects a utilitarian conception of justice, where individual utility is defined as personal income, and social welfare is the average of utilities in a population. A more attractive conception of justice is opportunity-equalization. Here, a two-dimensional measure of economic development is proposed, based upon viewing individuals' incomes as a consequence of circumstances, effort, and policy. The first dimension is the average income level of those in the society with the most disadvantaged circumstances, and the second dimension is the degree to which total income inequality is due to differential effort, as opposed to differential circumstances. This pair of numbers is computed for a set of 22 European countries. No country dominates all others on both dimensions. The two-dimensional measure induces a partial ordering of countries with respect to development.
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The world's interconnected demographic/fiscal transition
Hans Fehr, Sabine Jokisch & Laurence Kotlikoff
Journal of the Economics of Ageing, forthcoming
Abstract:
Will incomes of low and high skilled workers continue to diverge? Yes, according to our paper's dynamic, six-good, five-region - U.S., Europe, N.E. Asia (Japan, Korea, Taiwan, Hong Kong), China, and India, general equilibrium, life-cycle model. The model, which endogenizes specialization and features incomplete factor-price equalization, predicts a near doubling of the ratio of high- to low-skilled wages over the century. Increasing wage inequality arises from a traditional source - a rising worldwide relative supply of unskilled labor, reflecting Chinese and Indian productivity catchup. But growing wage inequality can be greatly mitigated if China and India dramatically improve the skill mix of successive cohorts via improved education.
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Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 Years
Guy Michaels, Ashwini Natraj & John Van Reenen
Review of Economics and Statistics, forthcoming
Abstract:
We test the hypothesis that information and communication technologies (ICT) "polarize" labor markets, by increasing demand for the highly educated at the expense of the middle educated, with little effect on low-educated workers. Using data on the US, Japan, and nine European countries from 1980-2004, we find that industries with faster ICT growth shifted demand from middle educated workers to highly educated workers, consistent with ICT-based polarization. Trade openness is also associated with polarization, but this is not robust to controlling for R&D. Technologies account for up to a quarter of the growth in demand for highly educated workers.
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Inequality, Diversity and Social Trust in Norwegian Communities
Elisabeth Ivarsflaten & Kristin Strømsnes
Journal of Elections, Public Opinion & Parties, Summer 2013, Pages 322-342
Abstract:
This article examines community effects on social trust in Norwegian communities. The large research literature on social trust agrees that community effects are important, but disagree about which aspects of communities influence social trust. The main current disagreement concerns the relative importance of ethnic diversity and socio-economic factors, such as income inequality within communities and differences in socio-economic standing between communities. We test the competing propositions on a Norwegian dataset consisting of 99 communities and 6,166 survey respondents within those communities arguing that it is particularly interesting to look at the relationship between diversity and social trust in the setting of a wealthy universalist welfare state. It is to our knowledge the first dataset that allows a hierarchical analysis of the determinants of social trust in the Norwegian context. The results of our models show that economic inequality, within and between communities, has a direct negative effect on social trust, but that it is not possible to separate the effects of ethnic diversity and level of unemployment. This study thus lends support to the body of research that first and foremost emphasizes the role of economic inequality in accounts of community differences and social trust.
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Jesper Rözer & Gerbert Kraaykamp
Social Indicators Research, September 2013, Pages 1009-1023
Abstract:
In this study we raise the question how a nation's income inequality affects subjective well-being. Using information on 195,091 individuals from 85 different countries from the World Value Surveys and the European Value Surveys, we established that in general, people living in more unequal countries report higher well-being than people from more equal countries. This association however does not apply to all people similarly. First, the positive effect of a nation's income inequality is weaker when individuals express more social and institutional trust, and underscore egalitarian norms to a larger extent. Second, the positive association between national income inequality and subjective well-being is less strong for people from countries with high levels of social and institutional trust. So, our research predominantly indicates that there are far-reaching effects of an individual's and a nation's trust on people's well-being.
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Unequal Opportunities and Distributive Justice
Gerald Eisenkopf, Urs Fischbacher & Franziska Föllmi-Heusi
Journal of Economic Behavior & Organization, September 2013, Pages 51-61
Abstract:
We provide experimental evidence on how unequal access to performance enhancing education affects demand for redistribution. People earn money in a real effort experiment and can then decide how to distribute it among themselves and another subjects. We compare situations in which randomly chosen people get access to performance enhancing education with situations in which either only luck or only performance determines outcome. We find that unequal opportunities evoke a preference for redistribution that is comparable to the situation when luck alone determines the allocation. However, people with unequal access to education are more likely to disagree about the appropriate distribution.
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Does Inequality Foster Corruption?
Indranil Dutta & Ajit Mishra
Journal of Public Economic Theory, August 2013, Pages 602-619
Abstract:
In this paper, we investigate how inequality affects corruption in the presence of an imperfect credit market. We favor an explanation based on a multimarket framework where corruption in one market (or sector) arises because of imperfections exacerbated by inequality in related markets. We demonstrate that even when an individual's ability to pay bribes and benefit from engaging in corruption are not affected by wealth level, greater (wealth) inequality will lead to an increase in corruption.
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What Are Lay Theories of Social Class?
Michael Varnum
PLoS ONE, July 2013
Abstract:
Numerous studies have documented the effects of social class on psychological and behavioral variables. However, lay beliefs about how social class affects these dimensions have not been systematically tested. Studies 1 and 2 assessed lay beliefs about the association between social class and 8 variables (including psychological and behavioral tendencies and cognitive ability). Study 3 assessed lay beliefs about the Big five personality traits and social class, and study 4 reframed the 8 variables from study 1 in opposite terms and yielded similar results. Study 5 contained the variables framed as in both studies 1 and 4, and replicated those results suggesting that framing effects were not responsible for the effects observed. Interestingly, for the most part lay beliefs about social class did not differ as a function of participants' own social class. In general people held relatively accurate and consistent stereotypes about the relationship between social class and well-being, health, intelligence, and neuroticism. In contrast lay beliefs regarding social class and reasoning styles, as well as relational, social, and emotional tendencies were less consistent and coherent. This work suggests that on the whole people's beliefs about social class are not particularly accurate, and further that in some domains there are contradictory stereotypes about the consequences of social class.
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Land markets and inequality: Evidence from medieval England
Cliff Bekar & Clyde Reed
European Review of Economic History, August 2013, Pages 294-317
Abstract:
The Hundred Rolls survey of 1279 documents substantially more inequality in the distribution of peasant landholdings than does the Domesday survey of 1086. Twelfth-century innovations in property rights over land induced peasants to expand the role of land market trades in their portfolio of risk-coping strategies. We argue that these events are related. Simulation analysis suggests that the primary source of the increasingly unequal distribution of peasant landholdings was the interaction between distress land sales and population growth driven by high fertility rates in households with large landholdings.