Achievement Unlocked

Kevin Lewis

October 22, 2021

People are more tolerant of inequality when it is expressed in terms of individuals rather than groups at the top
Jesse Walker, Stephanie Tepper & Thomas Gilovich
Proceedings of the National Academy of Sciences, 26 October 2021

Despite the ever-growing economic gap between the very wealthy and the rest of the population, support for redistributive policies tends to be low. This research tested whether people’s tolerance of inequality differs when it is represented in terms of a successful individual versus a group of people at the top of the economic ladder. We propose that drawing people’s attention to wealthy individuals undermines support for redistribution by leading people to believe that the rich person’s wealth is well deserved. Across eight studies (n = 2,800), survey participants rated unequal distributions of resources as more fair when presented with an individual, rather than a group, at the top of the distribution. Participants also expressed lower support for redistributive policies after considering inequality represented by successful individuals compared to groups. This effect was driven by people’s different attributions for individual versus group success. Participants thought that individuals at the top were more deserving of their successes and, in turn, were less likely to support redistribution when inequality was represented by individual success. These findings suggest that support for inequality, and policies to reduce it, may depend on who people are led to consider when they think about the top of the economic distribution. 

Behind rising inequality and falling growth
Jangyoun Lee
Journal of Macroeconomics, forthcoming

This paper investigates why the upsurge of top income shares has coincided with economic slowdowns in the US since the late 1970s. I argue that a fast-growing unearned income from ‘wealth residual’ – the unexplained increase in wealth that is not accompanied by any increase in real output – lies behind them. To support this hypothesis, I measure wealth residual from the national accounts and associated statistics, and then perform a set of panel regressions using a comprehensive panel dataset of the US at the state level. The estimation results demonstrate that the rapid growth of wealth residual during the last four decades has contributed to a co-evolution of fast-growing inequality and falling growth. 

No evidence for cumulating socioeconomic advantage. Ability explains increasing SES effects with age on children's domain test scores
Gary Marks & Michael O'Connell
Intelligence, September-October 2021

Studies that investigate the effects of socioeconomic background (SES) on student achievement tend to find stronger SES effects with age, although there is much inconsistency between studies. There is also a large academic literature on cumulative advantage arguing that SES inequalities increase as children age, a type of Matthew Effect. This study analysing data from the children of NLSY79 mothers (N ≈ 9000, Obs ≈ 27,000) investigates the relationship of SES by children's age for two cognitive domains (Peabody Picture Vocabulary test and digit span memory) and three achievement domains (reading comprehension, reading recognition and math). There are small increases in the SES-test score correlations for several domains, but there are more substantial increases in the test score correlations with mother's ability and prior ability. Regression analyses found linear increases in SES effects for all domains except digit memory. However, when considering mother's ability, the substantially reduced SES effects did not increase with children's age. Much of the effects of SES on children's domain scores are accounted for by mother's ability. The effects of prior ability also increase with age and SES effects are small. Therefore, there is no evidence for cumulative socioeconomic advantage for these domains. Generally, increases in SES effects on children's cognitive development and student achievement are likely to be spurious because of the importance of parents' abilities and their transmission from parents to children. 

Top Wealth in America: New Estimates and Implications for Taxing the Rich
Matthew Smith, Owen Zidar & Eric Zwic
NBER Working Paper, October 2021

This paper uses administrative tax data to estimate top wealth in the United States. We assemble new data that links people to their sources of capital income and develop new methods to estimate the degree of return heterogeneity within asset classes. Disaggregated fixed income data reveal that rich individuals earn much more of their interest income in higher-yielding forms, and have much greater exposure to credit risk. Consequently, in recent years, the interest rate on fixed income at the top is approximately three times higher than the average. Using firm-level characteristics to value firms, we find that twenty percent of total pass-through business wealth accrues to those with losses. We combine this new data on fixed income and pass-through business returns with refined estimates of C-corporation equity, housing, and pension wealth to deliver new capitalized wealth estimates. Our approach -- which builds on Saez and Zucman (2016) and Bricker, Henriques, and Hansen (2018) -- reduces bias because wealth and rates of return are correlated. From 1989 to 2016, the top 1%, 0.1%, and 0.01% wealth shares increased by 7.6, 5.1, and 3.0 percentage points, respectively, to 31.5%, 15.0%, and 7.0%. While these changes are less dramatic than some prior estimates, wealth is very concentrated: the top 1% holds nearly as much wealth as either the bottom 90% or the "P90-99" class. We discuss implications for income inequality measures, capital tax policy, and savings behavior. 

College as a Great Equalizer? Marriage and Assortative Mating Among First- and Continuing-Generation College Students
Michael King
Demography, forthcoming

College has been hailed as a “great equalizer” that can substantially reduce the influence of parents' socioeconomic status on their children's subsequent life chances. Do the equalizing effects of college extend beyond the well-studied economic outcomes to other dimensions, in particular, marriage? When and whom one marries have important implications for economic and family stability, with marriage acting as a social safety net, encouraging joint long-term investments, and potentially producing dual-earner families. I focus on the marriage timing and assortative mating patterns of first- and continuing-generation college graduates to test whether college acts as an equalizer for marriage against alternative hypotheses. Using discrete-time event-history methods and data from the National Longitudinal Survey of Youth 1997, I find small differences between first- and continuing-generation graduates in marriage timing, but larger differences in assortative mating, particularly for women. First-generation women have a substantially lower likelihood of marrying another college graduate than do continuing-generation women, and a higher likelihood of marrying a noncollege graduate. These findings highlight the importance of examining noneconomic outcomes when studying social mobility and offer insight into how inequality may persist across generations, especially for women, despite apparent upward mobility. 

Occupational Choice and the Intergenerational Mobility of Welfare
Corina Boar & Danial Lashkari
NBER Working Paper, October 2021 

Based on responses in the General Social Survey, we construct an index that captures non-monetary qualities of occupations, such as respect, learning, and work hazards, relevant to the well-being of workers. Using the Panel Study of Income Dynamics and National Longitudinal Survey of Youth data, we document that the children of richer US parents are more likely to select into occupations that rank higher in terms of this index. We rationalize this fact by introducing occupational choice with preferences over the intrinsic qualities of occupations into a standard theory of intergenerational mobility. Estimating the model allows us to infer the equivalent monetary compensation each worker receives from the intrinsic qualities of their chosen occupation. Earnings adjusted to reflect this additional compensation show substantially larger persistence of income from parents to children. Our model further predicts that the trends in the composition of labor demand in the US over the past three decades decreased intergenerational persistence, and also led to higher growth in the welfare of the average worker than that implied by observed earnings. 

Inequality in Place: Effects of Exposure to Neighborhood-Level Economic Inequality on Mortality
Linda Zhao et al.
Demography, forthcoming

This study contributes to the debate on whether income inequality is harmful for health by addressing several analytical weaknesses of previous studies. Using the Panel Study of Income Dynamics in combination with tract-level measures of income inequality in the United States, we estimate the effects of differential exposure to income inequality during three decades of the life course on mortality. Our study is among the first to consider the implications of income inequality within U.S. tracts for mortality using longitudinal and individual-level data. In addition, we improve upon prior work by accounting for the dynamic relationship between local areas and individuals' health, using marginal structural models to account for changes in exposure to local income inequality. In contrast to other studies that found no significant relation between income inequality and mortality, we find that recent exposure to higher local inequality predicts higher relative risk of mortality among individuals at ages 45 or older. 

Forecasting mortality inequalities in the U.S. based on trends in midlife health
Péter Hudomiet, Michael Hurd & Susann Rohwedder
Journal of Health Economics, forthcoming

Recent literature has documented a widening gap in mortality between older individuals of high versus low socioeconomic status (SES) in the U.S. This paper investigates whether this trend will continue. We analyze the health status of successive cohorts of 54–60-year-old U.S. individuals born between 1934 and 1959 and use a rich set of health indicators to forecast life expectancies. The detailed health measures come from the longitudinal Health and Retirement Study. We find that many health indicators have worsened recently. For example, rates of obesity, diabetes, and self-reported levels of pain sharply increased between 1992 and 2016. Directly relevant for mortality, recent cohorts report lower subjective survival probabilities. Using Social Security wealth as an SES indicator, we find strong evidence for increasing health inequalities. We predict overall life expectancy to increase further; but the increase will be concentrated among higher SES individuals and mortality inequality will continue to increase.

Understanding the Rise in Life Expectancy Inequality
Gordon Dahl et al.
University of California Working Paper, September 2021

We provide a novel decomposition of changing gaps in life expectancy between rich and poor into differential changes in age-specific mortality rates and differences in "survivability". Declining age-specific mortality rates increases life expectancy, but the gain is small if the likelihood of living to this age is small (ex ante survivability) or if the expected remaining lifetime is short (ex post survivability). Lower survivability of the poor explains between one-third and one-half of the recent rise in life expectancy inequality in the US and the entire change in Denmark. Our analysis shows that the recent widening of mortality rates between rich and poor due to lifestyle-related diseases does not explain much of the rise in life expectancy inequality. Rather, the dramatic 50% reduction in cardiovascular deaths, which benefited both rich and poor, made initial differences in lifestyle-related mortality more consequential via survivability.

Socioeconomic status across the life course and dementia-status life expectancy among older Americans
Hyungmin Cha, Mateo Farina & Mark Hayward
SSM - Population Health, September 2021

This study examines how socioeconomic status (SES) across the life course is associated with individuals’ lifetime dementia experience – the years of life persons can expect to live and without with dementia. Conceptually, dementia-free life expectancy reflects the ability to postpone dementia onset while dementia life expectancy reflects the average lifetime period with the condition. How SES across the life course contributes to dementia-status life expectancy is the focus of this study. We assess whether persons who are advantaged in their lifetime SES live the most years without dementia and the fewest years with dementia compared to less advantaged persons. Using the Health and Retirement Study (2000–2016), we examine these questions for U.S. adults aged 65 and older using multistate life tables and a microsimulation approach. The results show that higher SES persons can expect to live significantly more years of life without dementia and that the period of life with dementia is compressed compared to less advantaged persons. The results also underscore that importance of cumulative exposure, showing that adults from disadvantaged childhoods who achieve high education levels often have dementia experiences that are similar to or better than those of adults from advantaged childhoods who achieved low education levels. 

Testing the efficacy of three informational interventions for reducing misperceptions of the Black–White wealth gap
Bennett Callaghan et al.
Proceedings of the National Academy of Sciences, 21 September 2021

Americans remain unaware of the magnitude of economic inequality in the nation and the degree to which it is patterned by race. We exposed a community sample of respondents to one of three interventions designed to promote a more realistic understanding of the Black–White wealth gap. The interventions conformed to recommendations in messaging about racial inequality drawn from the social sciences yet differed in how they highlighted data-based trends in Black–White wealth inequality, a single personal narrative, or both. Data interventions were more effective than the narrative in both shifting how people talk about racial wealth inequality — eliciting less speech about personal achievement — and, critically, lowering estimates of Black–White wealth equality for at least 18 mo following baseline, which aligned more with federal estimates of the Black–White wealth gap. Findings from this study highlight how data, along with current recommendations in the social sciences, can be leveraged to promote more accurate understandings of the magnitude of racial inequality in society, laying the necessary groundwork for messaging about equity-enhancing policy. 

Genetic risks, adolescent health, and schooling attainment
Vikesh Amin et al.
Health Economics, November 2021, Pages 2905-2920

We provide new evidence on the effect of adolescent health behaviors/outcomes (obesity, depression, smoking, and attention deficit hyperactivity disorder [ADHD]) on schooling attainment using the National Longitudinal Study of Adolescent to Adult Health. We take two different approaches to deal with omitted variable bias and reverse causality. Our first approach attends to the issue of reverse causality by estimating the effect of health polygenic scores (PGSs) on schooling. Second, we estimate the effect of adolescent health using sibling fixed-effects models that control for unmeasured genetic and family factors shared by siblings. We use the PGSs as additional controls in the sibling fixed-effects models to reduce concerns about residual confounding from sibling-specific genetic differences. We find consistent evidence across both approaches that being genetically predisposed to smoking and smoking regularly in adolescence reduces schooling attainment. Estimates for depression are more imprecise, but also suggest that a high genetic risk of depression and adolescent depression reduce schooling attainment. We find mixed evidence for ADHD. Our estimates suggest that having a high genetic risk for ADHD reduces grades of schooling, but we do not find any statistically significant negative effects of ADHD. Finally, we find no consistent evidence for a detrimental effect of obesity on schooling attainment.


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