What we have
Educational Homogamy in Two Gilded Ages: Evidence from Inter-generational Social Mobility Data
Robert Mare
ANNALS of the American Academy of Political and Social Science, January 2016, Pages 117-139
Abstract:
Patterns of intermarriage between persons who have varying levels of educational attainment are indicators of socioeconomic closure and affect the family backgrounds of children. This article documents trends in educational assortative mating throughout the twentieth century in the United States, using socioeconomic data on adults observed in several large cross section surveys collected between 1972 and 2010 and on their parents who married a generation earlier. Spousal resemblance on educational attainment was very high in the early twentieth century, declined to an all-time low for young couples in the early 1950s, and has increased steadily since then. These trends broadly parallel the compression and expansion of socioeconomic inequality in the United States over the twentieth century. Additionally, educationally similar parents are more likely to have offspring who themselves marry within their own educational level. If homogamy in the parent generation leads to homogamy in the offspring generation, this may reinforce the secular trend toward increased homogamy.
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Invisibility Cloaks and Knapsacks: How the Advantaged Work to Conceal Privilege
Taylor Phillips & Brian Lowery
Stanford Working Paper, January 2016
Abstract:
We suggest the experience of unfair advantage pits two critical motives: the merit motive and the maintenance motive. Together, these motives lead people to mobilize their advantage in order to secure desired outcomes, but to conceal these advantages under the cloak of merit as they do so. In Experiments 1a and 1b, we find that when their advantages are exposed, the wealthy (but not the non-wealthy) claim increased effort at work. In Experiment 2, we show that the social elite claim their social advantages (family connections) were the result of effort, but suggest others’ social advantages were not. In Experiment 3, we find that the wealthy not only claim, but commit greater effort when their class advantages are exposed. Finally, in Experiment 4, we show that the educational elite claim that advantage resources are not useful, but then continue to take these resources and use them to their benefit anyway.
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Americans Still Overestimate Social Class Mobility: A Pre-Registered Self-Replication
Michael Kraus
Frontiers in Psychology, November 2015
Abstract:
Kraus and Tan (2015) hypothesized that Americans tend to overestimate social class mobility in society, and do so because they seek to protect the self. This paper reports a pre-registered exact replication of Study 3 from this original paper and finds, consistent with the original study, that Americans substantially overestimate social class mobility, that people provide greater overestimates when made while thinking of similar others, and that high perceived social class is related to greater overestimates. The current results provide additional evidence consistent with the idea that people overestimate class mobility to protect their beliefs in the promise of equality of opportunity. Discussion considers the utility of pre-registered self-replications as one tool for encouraging replication efforts and assessing the robustness of effect sizes.
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Money and Morale: Growing Inequality Affects How Americans View Themselves and Others
Michael Hout
ANNALS of the American Academy of Political and Social Science, January 2016, Pages 204-228
Abstract:
Dozens of past studies document how affluent people feel somewhat better about life than middle-class people feel and much better than poor people do. New analyses of the General Social Surveys from 1974 to 2012 address questions in the literature regarding aggregate responses to hard times, whether the income-class relationship is linear or not, and whether inequality affects happiness. General happiness dropped significantly during the Great Recession, suggesting that the income-happiness relationship might also exist at the macro level. People with extremely low incomes are not as unhappy as a linear model expects, but there is no evidence of a threshold beyond which personal happiness stops increasing. Comparing happiness over the long term, the affluent were about as happy in 2012 as they were in the 1970s, but the poor were much less happy. Consequently, the gross happiness gap by income was about 30 percent bigger in 2012 than it was in the 1970s. A multivariate model shows that the net effect of income on happiness also increased significantly over time.
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Economic inequality is related to cross-national prevalence of psychotic symptoms
Sheri Johnson, Erik Wibbels & Richard Wilkinson
Social Psychiatry and Psychiatric Epidemiology, December 2015, Pages 1799-1807
Purpose: A burgeoning literature documents robust links of income inequality with the prevalence of psychological disorders. The aim of this paper is to extend this literature by examining the effects of cross-national income inequality on prevalence of psychotic symptoms.
Method: Analyses used archival data of representative samples from 50 countries (N = 249,217). Four types of psychotic symptoms were assessed using the well-validated CIDI interview. We examined the effects of Standardized World Income Inequality Database (SWIID) measures of the concentration of income in the top percentile of people and the Gini coefficient of income inequality.
Results: Income inequality was significantly correlated with the national prevalence of hallucinations, delusions of thought control, and delusional mood, and effects withstood control over national indices of per capita income and regime type. Findings were also robust to nonparametric bootstrapping.
Conclusions: Although the cross-sectional design limits ability to claim causality, income inequality appears important for understanding psychotic symptoms.
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Large Cross-National Differences in Gene × Socioeconomic Status Interaction on Intelligence
Elliot Tucker-Drob & Timothy Bates
Psychological Science, forthcoming
Abstract:
A core hypothesis in developmental theory predicts that genetic influences on intelligence and academic achievement are suppressed under conditions of socioeconomic privation and more fully realized under conditions of socioeconomic advantage: a Gene × Childhood Socioeconomic Status (SES) interaction. Tests of this hypothesis have produced apparently inconsistent results. We performed a meta-analysis of tests of Gene × SES interaction on intelligence and academic-achievement test scores, allowing for stratification by nation (United States vs. non–United States), and we conducted rigorous tests for publication bias and between-studies heterogeneity. In U.S. studies, we found clear support for moderately sized Gene × SES effects. In studies from Western Europe and Australia, where social policies ensure more uniform access to high-quality education and health care, Gene × SES effects were zero or reversed.
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An Experimental Study of the Impact of Social Comparison on Investment
Gary Hoover & Erik Kimbrough
Social Science Quarterly, forthcoming
Objectives: With increasing attention being paid to inequality and poverty, this article attempts to shed light on mechanisms by which the poor arrive at decisions that are suboptimal and lead to “poverty traps.”
Methods: We design a laboratory experiment in which we induce wealth and income differences between subjects to compare their behavior in a simple, two-period life-cycle savings and consumption task that controls subjects’ homegrown risk preferences and isolates the impact of social comparison.
Results: We find evidence that social comparison leads to suboptimal investment choices among the income-poor.
Conclusions: One interpretation is that this is driven by a discouragement effect among those who are less likely to benefit from their investments — despite that fact that, by design, investment by all types leads to the same increase in expected utility.
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Inequality and Trust: New Evidence from Panel Data
Guglielmo Barone & Sauro Mocetti
Economic Inquiry, forthcoming
Abstract:
We estimate the causal link from income inequality to generalized trust by reconsidering the country-level evidence on this issue. First, we exploit the panel dimension of the data, thus controlling for any country unobservable time-invariant variables, and find a negative relationship between the two variables that holds only for developed countries. Second, we focus on these advanced economies and provide instrumental variable estimates using the predicted exposure to technological change as an exogenous driver of inequality. According to our findings, the negative causal effect of inequality on trust is even larger than that coming from ordinary least squares estimation. We also provide new insights on the effects of different dimensions of inequality, exploiting measures of both static inequality — such as the Gini index and top income shares — and dynamic inequality — proxied by intergenerational income mobility.
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More Unequal Income but Less Progressive Taxation: Economics or Politics?
Chunzan Wu
University of Pennsylvania Working Paper, November 2015
Abstract:
Since the 1970s, income inequality in the U.S. has increased sharply. During the same time span, the U.S. federal income tax has become less progressive. Why? I examine this question in a Ramsey optimal tax policy framework. Within this framework, the tax policy is determined by: (1) a set of Pareto weights representing the government’s preference over different households; and (2) household lifetime utilities summarizing the effects of economic fundamentals. I first study the changes in economic fundamentals using an overlapping generations incomplete-markets life-cycle model with heterogeneous households. The model features both endogenous human capital accumulation and household labor supply and is calibrated to the U.S. economy in the 1970s and 2010s. Then I use this economic model to determine whether the change in income tax is the result of an optimal policy response to changing economic fundamentals or the consequence of a change in Pareto weights. I interpret the latter as changes in the political influences of various income groups. I find that: (1) changes in economic fundamentals alone induce a less progressive optimal income tax and can account for 40% of the reduction in progressivity we observe; and (2) the change in Pareto weights required to explain the remaining part of tax policy change favors high-income households and also implies less valued government services. Finally, using a stylized political economy model, I discuss potential explanations for this change in Pareto weights such as the lower cost of conveying information to swing voters and the rising inequality of voter turnout among different socioeconomic groups.
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The tyranny puzzle in social preferences: An empirical investigation
Frank Cowell, Marc Fleurbaey & Bertil Tungodden
Social Choice and Welfare, December 2015, Pages 765-792
Abstract:
When forming their preferences about the distribution of income, rational people may be caught between two opposite forms of “tyranny.” Giving absolute priority to the worst-off imposes a sort of tyranny on the rest of the population, but giving less than absolute priority imposes a reverse form of tyranny where the worst-off may be sacrificed for the sake of small benefits to many well-off individuals. We formally show that this intriguing dilemma is more severe than previously recognised, and we examine how people negotiate such conflicts with a questionnaire-experimental study. Our study shows that both tyrannies are rejected by a majority of the participants, which makes it problematic for them to define consistent distributive preferences on the distribution.
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Jonathan Wai & Heiner Rindermann
Intelligence, November–December 2015, Pages 102–107
Abstract:
The path to becoming a CEO (and performance on the job) can be viewed as a difficult cognitive challenge. One way to examine this idea is to see how highly selected CEOs are in terms of education and cognitive ability. The extent to which Fortune 500 CEOs were selected on education and cognitive ability at an earlier age was retrospectively assessed at four time points that spanned 1996 to 2014 (Total N = 1991). Across the last 19 years, between 37.5% and 41.0% of these CEOs were found to attend an elite school which likely placed them in the top 1% of cognitive ability. People in the top 1% of ability, therefore, were likely overrepresented among these CEOs, at about 37 to 41 times the base rate. Even within each of the four samples, higher CEO education and cognitive ability was associated with higher gross revenue of the CEO's company. Although Fortune 500 CEOs were highly selected on education and cognitive ability, when placed in the context of a broader array of occupations in the extreme right tail of achievement (e.g., politicians, judges, billionaires, journalists, academics, powerful people, and other business elites), CEOs were not at the top. This showed the wide cognitive ability range (and mental test difficulty) across various occupations that compose the U.S. elite. That Fortune 500 CEOs had similar education and cognitive ability selectivity over time shows that the CEO (and perhaps business) occupational and filtering structure has remained relatively unchanged across the last two decades.
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The Minimum Wage and Inequality: The Effects of Education and Technology
Zsófia Bárány
Journal of Labor Economics, January 2016, Pages 237-274
Abstract:
In the past 30 years, wage inequality has increased steeply while real minimum wages have fallen. This paper demonstrates that a general equilibrium model with endogenous skill choice is required to correctly evaluate the implications of minimum wage changes. The minimum wage not only truncates the wage distribution but also affects skill prices and therefore changes the incentives that people face when making educational decisions. The calibrated model suggests — in line with recent empirical literature — that even though minimum wages affect the bottom end of the wage distribution more, their impact on the top end is significant as well.
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Who cares about relative status? A quantile approach to consumption of relative house size
Susane Leguizamon
Applied Economics Letters, Winter 2016, Pages 307-312
Abstract:
I estimate the willingness to pay (WTP) to live in a house near neighbours with relatively smaller (or larger) houses using housing transaction data. I find that consumers in the 50th and 75th percentile are willing to pay the most for an increase in relative housing consumption while consumers in the lower percentiles and the highest percentile yield a smaller, and statistically insignificant, WTP. This gives evidence to popular media reports that the middle class values relative status the most.
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Dependency Status and Demand for Social Insurance: Evidence from Experiments and Surveys
John Ahlquist, John Hamman & Bradley Jones
Political Science Research and Methods, forthcoming
Abstract:
Current thinking on the origins and size of the welfare state often ignores household relations in which people may depend on others for income or have dependents themselves. The influence of “dependency status” on individuals’ political preferences is unknown. We report results from a laboratory experiment designed to estimate the effect of dependency on preferences for policies that insure against labor market risk. Results indicate that (1) willingness to vote in favor of a social insurance policy is highly responsive to unemployment risk, (2) symmetric, mutual dependence is unrelated to support for insurance, but (3) asymmetric dependence (being dependent on someone else) increases support for social insurance. We connect our lab results to observational survey data and find similar relationships.
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Globalization and Wage Polarization
Guido Cozzi & Giammario Impullitti
Review of Economics and Statistics, forthcoming
Abstract:
In the 1980s and 1990s, the US labour market experiences a remarkable polarization along with fast technological catch-up, as Europe and Japan improve their global innovation performance. Is foreign technological convergence an important source of wage polarization? To answer this question, we build a multi-country Schumpeterian growth model with heterogeneous workers, endogenous skill formation and occupational choice. We show that convergence produces polarization through business stealing and increasing competition in global innovation races. Quantitative analysis shows that these channels can be important sources of US polarization. Moreover, the model delivers predictions on the US wealth-income ratio consistent with empirical evidence.
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Decomposing US regional income inequality from 1969 to 2009
Justin Doran & Declan Jordan
Applied Economics Letters, forthcoming
Abstract:
This article analyses changes in levels and composition of income inequality among US counties from 1969 to 2009. It also decomposes inequality using the Theil coefficient into between-State and within-State inequality. The article finds that income inequality has increased in the period studied with between-State inequality decreasing and within-State inequality increasing. We subsequently decompose income inequality into the proportion arising from differences in productivity and employment–population ratios across counties. The results suggest that inequality arising from differentials in labour productivity has fallen over the period studied while those arising from employment–population ratio differences have increased.
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Bright Minds, Big Rent: Gentrification and the Rising Returns to Skill
Lena Edlund, Cecilia Machado & Michaela Sviatchi
NBER Working Paper, November 2015
Abstract:
In 1980, housing prices in the main US cities rose with distance to the city center. By 2010, that relationship had reversed. We propose that this development can be traced to greater labor supply of high-income households through reduced tolerance for commuting. In a tract-level data set covering the 27 largest US cities, years 1980-2010, we employ a city-level Bartik demand shifter for skilled labor and find support for our hypothesis: full-time skilled workers favor proximity to the city center and their increased presence can account for the observed price changes, notably the rising price premium commanded by centrality.