What you got
Income Inequality and Status Seeking: Searching for Positional Goods in Unequal U.S. States
Lukasz Walasek & Gordon Brown
Psychological Science, April 2015, Pages 527-533
Abstract:
It is well established that income inequality is associated with lower societal well-being, but the psychosocial causes of this relationship are poorly understood. A social-rank hypothesis predicts that members of unequal societies are likely to devote more of their resources to status-seeking behaviors such as acquiring positional goods. We used Google Correlate to find search terms that correlated with our measure of income inequality, and we controlled for income and other socioeconomic factors. We found that of the 40 search terms used more frequently in states with greater income inequality, more than 70% were classified as referring to status goods (e.g., designer brands, expensive jewelry, and luxury clothing). In contrast, 0% of the 40 search terms used more frequently in states with less income inequality were classified as referring to status goods. Finally, we showed how residual-based analysis offers a new methodology for using Google Correlate to provide insights into societal attitudes and motivations while avoiding confounds and high risks of spurious correlations.
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Does the American Dream Matter for Members of Congress? Social-Class Backgrounds and Roll-Call Votes
Jacob Grumbach
Political Research Quarterly, forthcoming
Abstract:
Do legislators from upper-class backgrounds behave differently from those from humble beginnings? Scholars of representation have made progress understanding the effects of a legislator’s social class on roll-call votes, but ideology is also understood to be shaped during adolescence. Using data from Nicholas Carnes’ White-Collar Government, I find that upper-class members of Congress with working-class parents are significantly more liberal than upper-class members with upper-class parents. This trend is particular to the Democrats; Republican voting records do not significantly differ with respect to parental class. Findings are robust to potential confounders, including race, gender, and district characteristics.
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The politics of luck: Political ideology and the perceived relationship between luck and success
Dena Gromet, Kimberly Hartson & David Sherman
Journal of Experimental Social Psychology, July 2015, Pages 40–46
Abstract:
Three studies examined how individuals’ beliefs about the relation between luck and success varies with political ideology. Conservative participants endorsed luck as influential to success considerably less than liberal participants (Studies 1 and 2). The ideologically polarizing effect of luck was shown to be related to its emphasis on random chance: Polarization was not found in response to an external attribution for success that was unrelated to chance (Study 2), and was specific to the challenge that random chance poses to deservingness (Study 3). Moreover, conservatives’ support for the notion that luck contributes to success was related to their belief that luck is a quality of the person (which does not rely on random chance), whereas liberals’ support was not (Study 3). These findings demonstrate that there is ideological disagreement over how success in achieved, which may be at the heart of the ideological divide over wealth redistribution.
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Nicholas Hays & Corinne Bendersky
Journal of Personality and Social Psychology, forthcoming
Abstract:
Although hierarchies are thought to be beneficial for groups, empirical evidence is mixed. We argue and find in 7 studies spanning methodologies and samples that different bases of hierarchical differentiation have distinct effects on lower ranking group members’ disruptive competitive behavior because status hierarchies are seen as more mutable than are power hierarchies. Greater mutability means that more opportunity exists for upward mobility, which motivates individuals to compete in hopes of advancing their placement in the hierarchy. This research provides further evidence that different bases of hierarchy can have different effects on individuals and the groups of which they are a part and explicates a mechanism for those effects.
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Fiscal Policy and Economic Inequality in the U.S. States: Taxing and Spending from 1976 to 2006
Thomas Hayes & Xavier Medina Vidal
Political Research Quarterly, forthcoming
Abstract:
To what extent can state governments influence economic inequality? How do state fiscal policies of redistribution affect families in different economic situations? Using a large database of state fiscal policymaking tools (taxing and spending) between 1976 and 2006, we examine the effect of these tools on state-level inequality as well as the average incomes of families in different economic groups. We find that state taxing and spending efforts can influence these indicators of economic inequality, though these fiscal policy tools can have differential effects. Spending on unemployment compensation and cash assistance as well as revenue from taxes on corporations is found to reduce state-level inequality. We also find unemployment compensation to positively benefit the bottom 10th percentile of income earners, whereas the inheritance tax helps all income groups. Corporate tax revenue is associated with higher middle-class incomes, whereas income tax revenue benefits both middle and upper incomes. Sales tax revenue positively benefits wealthy earners. Higher property tax revenue is associated with decreased income for all groups. These results suggest that state governments can affect redistribution through fiscal policies by affecting state-level inequality as well as the economic fortunes of different income groups.
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Income Inequality, Tax Policy, and Economic Growth
Siddhartha Biswas, Indraneel Chakraborty & Rong Hai
University of Chicago Working Paper, April 2015
Abstract:
This paper investigates the impact of reduction of income inequality through tax policy on economic growth. Taxation along different points of the income distribution has a heterogeneous impact on households' incentives to invest, work, and consume, which may result in a heterogeneous impact on economic growth. The empirical analysis uses U.S. state-level data and micro-level household tax returns over the last three decades. To address potential selection biases in our regression analysis, we utilize both state fixed effects and instrumental variables approaches. We find that, ceteris paribus, reduction of income inequality between low income households and median income households improves economic growth. However, reduction of income inequality through taxation between median income households and high income households reduces economic growth. Further investigation shows that these economic growth effects are attributable both to supply-side factors (changes in small business activity and labor supply) and to consumption demand.
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Power, Markets, and Top Income Shares
Evelyne Huber & John Stephens
University of North Carolina Working Paper, March 2015
Abstract:
The rise of the super-rich has attracted much political and academic attention in recent years. However, to date there have been few attempts to explain the cross-national variation in the recent rise of very top incomes. Drawing on the World Top Incomes Database, we study the income share of the top 1% in almost all current postindustrial democracies from 1975 to 2012. We find that extreme income concentration at the very top is a predominantly political phenomenon, not the outcome of economic changes. Top income shares are largely unrelated to economic growth, increased knowledge-intensive production, export competitiveness, market size, financialization, and wealth accumulation. Instead, they are driven by various political and policy changes that reflect a decline in the relative power and resources of labor, such as union density and centralization, secular-right governments, and cuts in top marginal income tax rates as well as in public spending on education.
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Urbanicity Moderates Associations between Family Income and Adolescent Academic Achievement
Portia Miller & Elizabeth Votruba-Drzal
Rural Sociology, forthcoming
Abstract:
Research has shown that family income's relations to early childhood achievement is stronger in large inner cities and weaker in less urbanized areas. Research has not yet considered whether links between family income and achievement in adolescence differ across the urban to rural landscape. Using nationally representative data from the Early Childhood Longitudinal Study, Kindergarten Class of 1998–1999 (N ≈ 9,350), this study examines differences in family income's links with eighth-grade achievement across large urban, small urban, suburban, and rural communities. The point at which income-achievement links plateau occurs later in the income distribution in less urbanized areas. The magnitude of the association between family income and reading and science skills also differs across the urban-rural continuum, such that family income has stronger relations to reading and science achievement in urban cities and weaker links in suburban and rural communities.
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Economic Growth Evens Out Happiness: Evidence from Six Surveys
Andrew Clark, Sarah Flèche & Claudia Senik
Review of Income and Wealth, forthcoming
Abstract:
In spite of the great U-turn that saw income inequality rise in Western countries in the 1980s, happiness inequality has fallen in countries that have experienced income growth (but not in those that did not). Modern growth has reduced the share of both the “very unhappy” and the “perfectly happy.” Lower happiness inequality is found both between and within countries, and between and within individuals. Our cross-country regression results suggest that the extension of various public goods helps to explain this greater happiness homogeneity. This new stylized fact arguably comes as a bonus to the Easterlin paradox, offering a somewhat brighter perspective for developing countries.
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Socioeconomic status (SES) affects means–end behavior across the first year
Melissa Clearfield, Sarah Stanger & Helen Jenne
Journal of Applied Developmental Psychology, May–June 2015, Pages 22–28
Abstract:
This study assessed the impact of SES on early means–end behavior. Sixty-one 6- to 8- and 10- to 12-month-old infants from high and low SES families were presented with two tasks requiring a two-step process to retrieve a toy. On the cloth task, overall performance improved with age, but low SES infants showed delays. Performance by the 10- to 12-month-old low SES infants was identical to that of the 6- to 8-month-old high SES infants. On the hook task, again overall performance improved with age, but significant SES differences emerged at 10 to 12 months, with only 20% of low SES infants succeeding at the task, compared to 73% of high SES infants. The results suggest a divergence in means–end behavior between high and low SES infants by 6 months of age, adding to the well-known documentation of gaps in cognitive skills evident between high and low SES infants.
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Family income, parental education and brain structure in children and adolescents
Kimberly Noble et al.
Nature Neuroscience, forthcoming
Abstract:
Socioeconomic disparities are associated with differences in cognitive development. The extent to which this translates to disparities in brain structure is unclear. We investigated relationships between socioeconomic factors and brain morphometry, independently of genetic ancestry, among a cohort of 1,099 typically developing individuals between 3 and 20 years of age. Income was logarithmically associated with brain surface area. Among children from lower income families, small differences in income were associated with relatively large differences in surface area, whereas, among children from higher income families, similar income increments were associated with smaller differences in surface area. These relationships were most prominent in regions supporting language, reading, executive functions and spatial skills; surface area mediated socioeconomic differences in certain neurocognitive abilities. These data imply that income relates most strongly to brain structure among the most disadvantaged children.
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Neuroanatomical Correlates of the Income-Achievement Gap
Allyson Mackey et al.
Psychological Science, forthcoming
Abstract:
In the United States, the difference in academic achievement between higher- and lower-income students (i.e., the income-achievement gap) is substantial and growing. In the research reported here, we investigated neuroanatomical correlates of this gap in adolescents (N = 58) in whom academic achievement was measured by statewide standardized testing. Cortical gray-matter volume was significantly greater in students from higher-income backgrounds (n = 35) than in students from lower-income backgrounds (n = 23), but cortical white-matter volume and total cortical surface area did not differ significantly between groups. Cortical thickness in all lobes of the brain was greater in students from higher-income than lower-income backgrounds. Greater cortical thickness, particularly in temporal and occipital lobes, was associated with better test performance. These results represent the first evidence that cortical thickness in higher- and lower-income students differs across broad swaths of the brain and that cortical thickness is related to scores on academic-achievement tests.
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Wealth Inequality, Family Background, and Estate Taxation
Mariacristina De Nardi & Fang Yang
NBER Working Paper, March 2015
Abstract:
This paper provides two main contributions. First, it provides a new theory of wealth inequality that merges two forces generating inequality: bequest motives and inheritance of ability across generations; and an earnings process that allows for more earnings risk for the richest. Second, it uses a calibrated framework to study the effects of changing estate taxation on inequality, aggregate capital accumulation and output, the economic advantage of being born to a given parental background, and welfare. Our calibrated model generates realistically skewed distributions for wealth, earnings, and bequests and implies that parental background is a crucial determinant of one’s expected lifetime utility. We find that increasing the estate tax rate would significantly reduce wealth concentration in the hands of the richest few and would reduce the economic advantage of being born to a super-rich family, but also would lower aggregate capital and output. Lastly, it would also generate a significant welfare gain from the ex-ante standpoint of a newborn under the veil of ignorance.
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Does slow growth lead to rising inequality? Some theoretical reflections and numerical simulations
Tim Jackson & Peter Victor
Ecological Economics, forthcoming
Abstract:
This paper explores the hypothesis (most notably made by French economist Thomas Piketty) that slow growth rates lead to rising inequality. If true, this hypothesis would pose serious challenges to achieving ‘prosperity without growth’ or meeting the ambitions of those who call for an intentional slowing down of growth on ecological grounds. It would also create problems of social justice in the context of a ‘secular stagnation’. The paper describes a closed, demand-driven, stock-flow consistent model of Savings, Inequality and Growth in a Macroeconomic framework (SIGMA) with exogenous growth and savings rates. SIGMA is used to examine the evolution of inequality in the context of declining economic growth. Contrary to the general hypothesis, we find that inequality does not necessarily increase as growth slows down. In fact, there are certain conditions under which inequality can be reduced significantly, or even eliminated entirely, as growth declines. The paper discusses the implications of this finding for questions of employment, government fiscal policy and the politics of de-growth.
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Joanne Lindley & Steven McIntosh
Labour Economics, forthcoming
Abstract:
Increasing participation in Higher Education, and the rising number of graduates in the labour markets of most developed countries, are likely to alter graduate wage distributions. Increasing wage inequality amongst graduates has been observed in a number of countries. This paper takes as an example the UK, where the increase in inequality has been amongst the highest, to investigate any potential link between these two phenomena of participation and inequality. Dividing graduates by subject of degree to provide more variation, we show that most of the increase in graduate wage inequality has occurred within subjects. We investigate two potential explanations, specifically the increase in the variance of childhood cognitive test scores amongst graduates in the same subject, and the widening variety of jobs performed by graduates with degrees in the same subject. The paper shows that both of these factors have played a role in explaining growing graduate wage inequality within subjects, though the largest is by far from the increased variance of test scores. The results also show that mean test scores are falling over time within every subject to a greater or lesser extent, suggesting that the widening variance of test scores is due to universities accepting individuals from lower in the ability distribution, as Higher Education participation has expanded.
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Income Inequality, Equal Opportunity, and Attitudes About Redistribution
Liza Steele
Social Science Quarterly, forthcoming
Objective: This article explores how income inequality and social mobility affect attitudes about redistribution in global perspective.
Methods: Individual-level data on over 50,000 individuals from 38 countries in the International Social Survey Programme are combined with country-level data from the World Bank, Standardized Income Inequality Database, and the Economic Freedom of the World data. OLS regression models with robust, clustered standard errors are estimated to account for the presence of unobserved, country-level effects in the error terms.
Results: Social mobility is found to be a more important predictor of preferences for redistribution than income inequality. Specifically, those who live in countries with greater social mobility are more supportive of redistribution while individuals who have experienced upward mobility themselves are less supportive, although an upwardly mobile individual in a more mobile society is more supportive of redistribution than an upwardly mobile individual in a less mobile society.
Conclusions: The central finding of this study is that the tangibility of redistributive social policies may bolster support for social spending. The structures and institutions that facilitate upward mobility — and potentially attenuate some of the detrimental effects of income inequality — are generally the products of more comprehensive redistribution policies, and public opinion may reflect this.
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Brenda Lutz & James Lutz
Cambridge Review of International Affairs, forthcoming
Abstract:
Past research has found that globalization and political violence have been linked in both modern and less modern times. Normally, groups that have been disadvantaged or displaced by globalization are seen as responsible for these outbreaks of violence. In the case of the Late Republic of Rome and medieval Italy before the Renaissance, violence was actually prompted by major increases in wealth among those who benefited when control of the political system became much more valuable. The increased value raised the stakes of political control and underlay the resulting higher levels of violence.
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Biases in choices about fairness: Psychology and economic inequality
Zachary Michaelson
Judgment and Decision Making, March 2015, Pages 198–203
Abstract:
This paper investigates choices about “distributional fairness” (sometimes called “distributive justice”), i.e., selection of the proper way for resources to be distributed in group. The study finds evidence that several of the same biases of risky decision making also apply to choices about distributional fairness, in particular focusing on the key biases that lead to prospect theory. This finding is achieved by introducing a novel thought experiment regarding the fairness of resource distributions, then manipulating the percentage of individuals who gain or lose in these distributions, and changing the sizes of gains and losses. Shared biases may mean similar heuristics are being employed. The mechanism behind this result leaves room for future exploration, as do the implications of the finding for related applications in inequality research.