Trickling
Innocent Bystanders? Monetary Policy and Inequality
Olivier Coibion et al.
Journal of Monetary Economics, June 2017, Pages 70–89
Abstract:
We study the effects of monetary policy shocks on — and their historical contribution to — consumption and income inequality in the United States since 1980 as measured by the Consumer Expenditure Survey. Contractionary monetary policy systematically increases inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary policy shocks account for a non-trivial component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document some of the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy.
Signs of Social Class: The Experience of Economic Inequality in Everyday Life
Michael Kraus, Jun Won Park & Jacinth Tan
Perspectives on Psychological Science, May 2017, Pages 422-435
Abstract:
By some accounts, global economic inequality is at its highest point on record. The pernicious effects of this broad societal trend are striking: Rising inequality is linked to poorer health and well-being across countries, continents, and cultures. The economic and psychological forces that perpetuate inequality continue to be studied, and in this theoretical review, we examine the role of daily experiences of economic inequality — the communication of social class signals between interaction partners — in this process. We theorize that social class signals activate social comparison processes that strengthen group boundaries between the haves and have nots in society. In particular, we argue that class signals are a frequent, rapid, and accurate component of person perception, and we provide new data and analyses demonstrating the accuracy of class signaling in 60-s interactions, Facebook photographs, and isolated recordings of brief speech. We suggest that barriers to the reduction of economic inequality in society arise directly from this class signaling process through the augmentation of class boundaries and the elicitation of beliefs and behaviors that favor the economic status quo.
Does Consumer Demand Reproduce Inequality? High-Income Consumers, Vertical Differentiation, and the Wage Structure
Nathan Wilmers
American Journal of Sociology, July 2017, Pages 178-231
Abstract:
This article considers the effects on the wage structure of the U.S. economy’s growing reliance on demand from high-income consumers. Relative to the mass consumers that defined the post–World War II U.S. economy, high-income consumers are willing to pay for high-quality and high-status products. These spending patterns split producers into up-market and down-market segments and stoke winner-take-all dynamics among up-market producers. Economic dependence on high-income consumers could thus lead to a new form of industrial segmentation, based on vertical differentiation by product quality or status. To test these predictions, data from consumer expenditure and wage surveys are linked using input-output tables and used to fit variance function regressions. Results show that industries more dependent on high-income consumers have greater wage inequality. This analysis identifies a new structural source of wage inequality not considered in previous research: the increasingly unequal composition of consumer demand reproduces wage inequality.
The role of education for intergenerational income mobility: A comparison of the United States, Great Britain, and Sweden
Paul Gregg et al.
Social Forces, forthcoming
Abstract:
Previous studies have found that intergenerational income persistence is relatively high in the United States and Britain, especially as compared to Nordic countries. We compare the association between family income and sons’ earnings in the United States (National Longitudinal Study of Youth 1979), Britain (British Cohort Study 1970), and Sweden (Population Register Data, 1965 cohort), and find that both income elasticities and rank-order correlations are highest in the United States, followed by Britain, with Sweden being clearly more equal. We ask whether differences in educational inequality and in return to qualifications can explain these cross-country differences. Surprisingly, we find that this is not the case, even though returns to education are higher in the United States. Instead, the low income mobility in the United States and Britain is almost entirely due to the part of the parent-son association that is not mediated by educational attainment. In the United States and especially Britain, parental income is far more important for earnings at a given level of education than in Sweden, a result that holds also when controlling for cognitive ability. This goes against widespread ideas of the United States as a country where the role of ascription is limited and meritocratic stratification prevails.
Perceptions of socioeconomic mobility influence academic persistence among low socioeconomic status students
Alexander Browman et al.
Journal of Experimental Social Psychology, September 2017, Pages 45–52
Abstract:
Despite facing daunting odds of academic success compared with their more socioeconomically advantaged peers, many students from low socioeconomic status (SES) backgrounds maintain high levels of academic motivation and persist in the face of difficulty. We propose that for these students, academic persistence may hinge on their perceptions of socioeconomic mobility, or their general beliefs regarding whether or not socioeconomic mobility — a powerful academic motivator — can occur in their society. Specifically, low-SES students' desire to persist on a primary path to mobility (i.e., school) should remain strong if they believe that socioeconomic mobility can occur in their society. By contrast, those who believe that socioeconomic mobility generally does not occur should be less motivated to persist academically. One correlational and two experimental studies provide support for this hypothesis among low (but not high) SES high school and university students. Implications for future intervention efforts are discussed.
Rising Intragenerational Occupational Mobility in the United States, 1969 to 2011
Benjamin Jarvis & Xi Song
American Sociological Review, June 2017, Pages 568-599
Abstract:
Despite the theoretical importance of intragenerational mobility and its connection to intergenerational mobility, no study since the 1970s has documented trends in intragenerational occupational mobility. The present article fills this intellectual gap by presenting evidence of an increasing trend in intragenerational mobility in the United States from 1969 to 2011. We decompose the trend using a nested occupational classification scheme that distinguishes between disaggregated micro-classes and progressively more aggregated meso-classes, macro-classes, and manual and nonmanual sectors. Log-linear analysis reveals that mobility increased across the occupational structure at nearly all levels of aggregation, especially after the early 1990s. Controlling for structural changes in occupational distributions modifies, but does not substantially alter, these findings. Trends are qualitatively similar for men and women. We connect increasing mobility to other macro-economic trends dating back to the 1970s, including changing labor force composition, technologies, employment relations, and industrial structures. We reassert the sociological significance of intragenerational mobility and discuss how increasing variability in occupational transitions within careers may counteract or mask trends in intergenerational mobility, across occupations and across more broadly construed social classes.
Political Economy of Redistribution
Daniel Diermeier, Georgy Egorov & Konstantin Sonin
Econometrica, May 2017, Pages 851–870
Abstract:
It is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation. We use a model of multilateral bargaining to demonstrate that this intuition may be flawed. Increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property protection. One is formal constraints that allow individuals or groups to block any redistribution that is not in their favor. The other occurs in equilibrium where players without such powers protect each other from redistribution. Players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. In a stable allocation, the society exhibits a “class” structure with class members having equal wealth and strategically protecting each other from redistribution.
Inequality and top income cyclicality
Kevin Capehart
Economics Letters, August 2017, Pages 152–154
Abstract:
Previous studies have shown that, as top incomes became more concentrated over recent decades, they also became more cyclical. This paper derives an exact expression for top-income cyclicality to show that it rises whenever average income growth tends to be captured by those at the top, as it has over recent decades. The increased cyclicality of top incomes may therefore be a reflection of their increased concentration rather than a distinct phenomenon in need of its own explanation.
From Childhood to Adult Inequality: Parental Investments and Early Childhood Development
Diego Daruich
NYU Working Paper, June 2017
Abstract:
Macroeconomic analysis of inequality and intergenerational mobility typically abstracts from the role of endogenous childhood development. This paper shows that this omission is not innocuous. It extends the standard general-equilibrium heterogeneous-agent life-cycle model with earnings risk and credit constraints to incorporate endogenous early childhood investments (parental time and money), family transfers, and college education. Agents cannot invest in their own childhood development or pay their parents to do so, which can lead to inefficiently low levels of investments. Estimating the model to match key moments of the data (e.g., average childhood investments and returns to skills), we find that a government program that funds early childhood investments would reduce inequality by 20% and improve mobility by 60%, as well as yield a three times larger welfare increase than a government transfer that uses the equivalent revenue. Introducing these investments in the model as a short-run small-scale policy — as in an RCT — would underestimate the benefits by two-thirds. Long-run distribution changes are the main drivers of the differences in welfare and mobility outcomes, while general-equilibrium is important for the reduction of inequality. The paper also shows that by taking a temporary deficit to afford these investments in the transition, the government is able to increase the welfare of every new generation.
The Relations Between Parental Socioeconomic Status, Personality, and Life Outcomes
Mona Ayoub et al.
Social Psychological and Personality Science, forthcoming
Abstract:
Studies have shown that cognitive ability is correlated with parental socioeconomic status (pSES). However, little is known about the correlation between personality and pSES. To better understand this relation, we conducted a meta-analysis of the correlations between pSES and personality traits and temperament dimensions. The correlations were generally very small with the exception of the correlation between pSES and openness to experience. Our results were replicated in a large (N = 2,183,377) data set of self-reported personality scores collected online. Using this data set, we also examined the interaction between pSES and personality on attained education and socioeconomic status. We found evidence for the resource substitution hypothesis, which proposes that personality compensates for background disadvantage.
Similarity focus and support for redistribution
Nailya Ordabayeva & Daniel Fernandes
Journal of Experimental Social Psychology, September 2017, Pages 67–74
Abstract:
Although wealth inequality in the U.S. has soared to unprecedented levels in recent decades, support for redistribution is not commonplace. This research proposes a new strategy to boost redistribution support, by prompting focus on similarity (vs. dissimilarity). Four studies conducted with U.S. participants online (sampled at approximately 150 per condition in Studies 1A, 1B, and 3, and 250 participants per condition in Study 2) show that similarity (vs. dissimilarity) focus increases redistribution support. This is because focusing on similarity (vs. dissimilarity) boosts the perception that people are similar in dispositional inputs (hard work, motivation), which, in turn, weakens the justification of dissimilar outcomes and the perceived fairness of the unequal wealth distribution. The findings support the view that redistribution preferences and beliefs that justify them can be malleable, and they contribute to the emerging literature on using external manipulations to shift redistribution support.
The Geography of Family Differences and Intergenerational Mobility
Ryan Gallagher, Robert Kaestner & Joseph Persky
University of Illinois Working Paper, April 2017
Abstract:
A recent series of studies by the Equality of Opportunity Project has documented substantial geographical differences in intergenerational income mobility. These spatial differences are important because they suggest that place matters more than previously thought in determining economic well-being. In this paper, we show that family characteristics vary widely across areas and simulations indicate that differences these family characteristics can explain a substantial share of the variation in intergenerational income mobility across places documented by the Equality of the Opportunity Project. Additionally, we show that the characteristics of families that move differ substantially from families that do not move, which raise doubts about the external validity of causal inferences based on the Equality of Opportunity Project’s analysis of movers.
Tax Evasion and Inequality
Annette Alstadsæter, Niels Johannesen & Gabriel Zucman
University of California Working Paper, May 2017
Abstract:
This paper attempts to estimate the size and distribution of tax evasion in rich countries. We combine stratified random audits — the key source used to study tax evasion so far — with new micro-data leaked from two large offshore financial institutions, HSBC Switzerland (“Swiss leaks”) and Mossack Fonseca (“Panama Papers”). We match these data to population-wide wealth records in Norway, Sweden, and Denmark. We find that tax evasion rises sharply with wealth, a phenomenon that random audits fail to capture. On average about 3% of personal taxes are evaded in Scandinavia, but this figure rises to about 30% in the top 0.01% of the wealth distribution, a group that includes households with more than $40 million in net wealth. A simple model of the supply of tax evasion services can explain why evasion rises steeply with wealth. Taking tax evasion into account increases the rise in inequality seen in tax data since the 1970s markedly, highlighting the need to move beyond tax data to capture income and wealth at the top, even in countries where tax compliance is generally high. We also find that after reducing tax evasion — by using tax amnesties — tax evaders do not legally avoid taxes more. This result suggests that fighting tax evasion can be an effective way to collect more tax revenue from the ultra-wealthy.
Wealth inequality and activism: Perceiving injustice galvanizes social change but perceptions depend on political ideologies
Crystal Hoyt et al.
European Journal of Social Psychology, forthcoming
Abstract:
What motivates people to engage in activism against wealth inequality? The simple answer is, perceiving injustice. However, the current work demonstrates that these perceptions depend on political ideologies. More specifically, for political liberals who frequently question the fairness of the economic system, messages simply describing the extent of the inequality (distributive injustice) are enough to motivate activism (Study 1). For political conservatives, who are inclined to believe that inequality results from fair procedures, messages must also detail how the system of economic forces is unjust (procedural injustice; Studies 2 and 3). Together, these studies suggest perceiving injustice can galvanize social change, but for conservatives, this means more than simply outlining the extent of the inequality.
Relative and Absolute Deprivation’s Relationship With Violent Crime in the United States: Testing an Interaction Effect Between Income Inequality and Disadvantage
Bert Burraston, James McCutcheon & Stephen Watts
Crime & Delinquency, forthcoming
Abstract:
Relative deprivation and absolute deprivation both have effects on crime. Although these two concepts are often treated as separate, some scholarship has suggested that the two may be complementary. The current study assesses whether the effects of relative and absolute deprivation interact statistically in their effect on violent crime by testing an interaction effect between income inequality and disadvantage. Using data from U.S. counties, hierarchical linear modeling (HLM) regression models show that there is a significant interaction between relative and absolute deprivation predicting violent crime rates. The plot of this interaction shows that when absolute deprivation is high, there is less violence in high inequality counties than in counties with medium levels of inequality. The implication of this finding is discussed.