From top to bottom
Peter Belmi & Margaret Neale
Organizational Behavior and Human Decision Processes, July 2014, Pages 133-149
Abstract:
Five studies tested the hypothesis that self-perceived attractiveness shapes people's perceptions of their social class (subjective SES), which, in turn, shape how people respond to inequality and social hierarchies. Study 1 found that self-perceived attractiveness was associated with support for group-based dominance and belief in legitimizing ideologies, and that these relationships were mediated by subjective social class. Subsequent experiments showed that higher self-perceived attractiveness increased subjective SES, which in turn, increased SDO (Study 2 and Study 5); promoted stronger beliefs in dispositional causes of inequality (Study 3); and reduced donations to a movement advocating for social equality (Study 4). By contrast, lower self-perceived attractiveness decreased subjective SES, which in turn, led to a greater tendency to reject social hierarchies and to construe inequality in terms of contextual causes. These effects emerged even after controlling for power, status, and self-esteem, and were not simply driven by inducing people to see themselves positively on desirable traits (Study 4 and Study 5).
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Jojanneke van der Toorn et al.
Political Psychology, forthcoming
Abstract:
In an attempt to explain the stability of hierarchy, we focus on the perspective of the powerless and how a subjective sense of dependence leads them to imbue the system and its authorities with legitimacy. In Study 1, we found in a nationally representative sample of U.S. employees that financial dependence on one's job was positively associated with the perceived legitimacy of one's supervisor. In Study 2, we observed that a general sense of powerlessness was positively correlated with the perceived legitimacy of the economic system. In Studies 3 and 4, priming experimental participants with feelings of powerlessness increased their justification of the social system, even when they were presented with system-challenging explanations for race, class, and gender disparities. In Study 5, we demonstrated that the experience of powerlessness increased legitimation of governmental authorities (relative to baseline conditions). The processes we identify are likely to perpetuate inequality insofar as the powerless justify rather than strive to change the hierarchical structures that disadvantage them.
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The Political Economy of Ownership: Housing Markets and the Welfare State
Ben Ansell
American Political Science Review, forthcoming
Abstract:
The major economic story of the last decade has been the surge and collapse of house prices worldwide. Yet political economists have had little to say about how this critical phenomenon affects citizens' welfare and their demands from government. This article develops a novel theoretical argument linking housing prices to social policy preferences and policy outcomes. I argue that homeowners experiencing house price appreciation will become less supportive of redistribution and social insurance policies since increased house prices both increase individuals' permanent income and the value of housing as self-supplied insurance against income loss. Political parties of the right will, responding to these preferences, cut social spending substantially during housing booms. I test these propositions using both microdata on social preferences from panel surveys in the USA, the UK, and a cross-country survey of 29 countries, and macrodata of national social spending for 18 countries between 1975 and 2001.
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Roy Kwon
Social Science Quarterly, forthcoming
Objective: Recent research indicates that political polarization in Congress and income inequality share a closely linked positive association. But virtually no studies examine the direction of influence between these variables as it is assumed that income inequality causes political polarization. The major purpose of this investigation is to examine the temporal causal ordering of these variables.
Methods: This study constructs a time series national-level data set with information for the years 1913 to 2008. Vector autoregression and granger causality tests are utilized to explore the temporal causal ordering of congressional polarization and the income share of the top 0.1, 1.0, 5.0, and 10.0 percent of earners in the United States. Autoregressive conditional heteroskedasticity regressions are also employed to assess the strength of the association between congressional polarization and top incomes net of relevant control variables.
Results: The findings indicate that the past values of congressional polarization are better predictors of top income shares than vice versa. The results also demonstrate that polarization in the House of Representatives produces a more consistent and robust connection with top incomes than polarization in the Senate. Lastly, congressional polarization only produces robust associations with the income share of the top 0.1 and 1.0 percent of earners but not for the top 5.0 and 10.0 percent.
Conclusion: While the Senate possesses more powerful negative agenda control procedures to stifle the legislative processes vis-à-vis the House, it is polarization in the latter that returns the more robust associations with income inequality.
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Social class differences produce social group preferences
Suzanne Horwitz, Kristin Shutts & Kristina Olson
Developmental Science, forthcoming
Abstract:
Some social groups are higher in socioeconomic status than others and the former tend to be favored over the latter. The present research investigated whether observing group differences in wealth alone can directly cause children to prefer wealthier groups. In Experiment 1, 4-5-year-old children developed a preference for a wealthy novel group over a less wealthy group. In Experiment 2, children did not develop preferences when groups differed by another kind of positive/negative attribute (i.e. living in brightly colored houses vs. drab houses), suggesting that wealth is a particularly meaningful group distinction. Lastly, in Experiment 3, the effect of favoring novel wealthy groups was moderated by group membership: Children assigned to a wealthy group showed ingroup favoritism, but those assigned to a less wealthy group did not. These experiments shed light on why children tend to be biased in favor of social groups that are higher in socioeconomic status.
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The Decline of the U.S. Labor Share
Michael Elsby, Bart Hobijn & Ayşegül Şahin
Brookings Papers on Economic Activity, Fall 2013, Pages 1-63
Abstract:
Over the past quarter century, labor's share of income in the United States has trended downward, reaching its lowest level in the postwar period after the Great Recession. A detailed examination of the magnitude, determinants, and implications of this decline delivers five conclusions. First, about a third of the decline in the published labor share appears to be an artifact of statistical procedures used to impute the labor income of the self-employed that underlies the headline measure. Second, movements in labor's share are not solely a feature of recent U.S. history: The relative stability of the aggregate labor share prior to the 1980s in fact veiled substantial, though offsetting, movements in labor shares within industries. By contrast, the recent decline has been dominated by the trade and manufacturing sectors. Third, U.S. data provide limited support for neoclassical explanations based on the substitution of capital for (unskilled) labor to exploit technical change embodied in new capital goods. Fourth, prima facie evidence for institutional explanations based on the decline in unionization is inconclusive. Finally, our analysis identifies offshoring of the labor-intensive component of the U.S. supply chain as a leading potential explanation of the decline in the U.S. labor share over the past 25 years.
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Lene Aarøe & Michael Bang Petersen
Journal of Politics, forthcoming
Abstract:
A robust finding in the welfare state literature is that public support for the welfare state differs widely across countries. Yet recent research on the psychology of welfare support suggests that people everywhere form welfare opinions using psychological predispositions designed to regulate interpersonal help giving using cues regarding recipient effort. We argue that this implies that cross-national differences in welfare support emerge from mutable differences in stereotypes about recipient efforts rather than deep differences in psychological predispositions. Using free-association tasks and experiments embedded in large-scale, nationally representative surveys collected in the United States and Denmark, we test this argument by investigating the stability of opinion differences when faced with the presence and absence of cues about the deservingness of specific welfare recipients. Despite decades of exposure to different cultures and welfare institutions, two sentences of information can make welfare support across the U.S. and Scandinavian samples substantially and statistically indistinguishable.
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Economic Background and Educational Attainment: The Role of Gene-Environment Interactions
Owen Thompson
Journal of Human Resources, Spring 2014, Pages 263-294
Abstract:
On average, children from less economically privileged households have lower levels of educational attainment than their higher-income peers, and this association has important implications for intergenerational mobility and equality of opportunity. This paper shows that the income-education association varies greatly across groups of children with different versions of a specific gene, monoamine-oxidase A (MAOA), which impacts neurotransmitter activity. For children with one MAOA variant, increases in household income have the expected positive association with education. For children with another variant, who comprise over half of the population, this relationship is much weaker. These results hold when the interactive effects are identified using genetic variation between full biological siblings, which genetic principles assert is as good as randomly assigned.
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Personality and the Reproduction of Social Class
Michael Shanahan et al.
Social Forces, forthcoming
Abstract:
A burgeoning literature in psychology and economics examines how personality characteristics predict indicators of attained status. We build on this research by suggesting that connections between personality and attained status are also socially contingent: Valued personality characteristics are stronger predictors of attainments at lower levels of parent education (the resource substitution hypothesis), but such characteristics are less likely among the children of less educated parents (the structural amplification hypothesis). We examine these possibilities by drawing on the Mini-IPIP (a standardized instrument assessing personality), the National Longitudinal Study of Adolescent Health, and a statistical framework to test for moderated mediation. Results reveal that (1) personality characteristics have notable associations with educational attainment, hourly wages, and self-direction at work; (2) personality often has stronger associations with status attainments at lower levels of parent education; and (3) personality is a weak mediator of associations between parent education and attained status. That is, the children of less educated parents may benefit more from valued personality characteristics, but they are slightly less likely to possess such characteristics. These results are discussed in terms of new avenues for research into diverse forms of capital and status attainment.
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Globalization and Top Income Shares
Lin Ma
U.S. Census Bureau Working Paper, February 2014
Abstract:
How does globalization affect the income gaps between the rich and the poor? This paper presents a new piece of empirical evidence showing that access to the global market, either through exporting or through multinational production, is associated with a higher executive-to-worker pay ratio within the firm. It then builds a model with heterogeneous firms, occupational choice, and executive compensation to model analytically and assess quantitatively the impact of globalization on the income gaps between the rich and the poor. The key mechanism is that the "gains from trade" are not distributed evenly within the same firm. The compensation of an executive is positively linked to the size of the firm, while the wage paid to the workers is determined in a country-wide labor market. Any extra profit earned in the foreign markets benefits the executives more than the average worker. Counterfactual exercises suggest that this new channel is quantitatively important for the observed surge in top income shares in the data. Using the changes in the volume of trade and multinational firm sales, the model can explain around 33 percent of the surge in top income shares over the past two decades in the United States.
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Trends in Earnings Differentials across College Majors and the Changing Task Composition of Jobs
Joseph Altonji, Lisa Kahn & Jamin Speer
American Economic Review, May 2014, Pages 387-393
Abstract:
We show that, among college graduates, earnings differentials across field of study have increased substantially since the early 1990s. We study the degree to which this increase can be accounted for by changes in the labor market return to skills associated with a major. To do so, we define major-specific measures of the relative importance of abstract, routine, and manual tasks on the job, by linking majors to the occupations they typically lead to. Changes in the relationship between earnings and these measures can account for about two-thirds of the rise in inequality.
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Arthur Sakamoto & ChangHwan Kim
Sociological Quarterly, Spring 2014, Pages 282-314
Abstract:
Using data on earnings and productivity for U.S. manufacturing industries from 1971 to 2001, we investigate economic rents and rising income inequalities. The results suggest that rents are most significant for managers, professionals, middle-aged workers, and older workers. Conversely, negative rents are evident for women, Hispanics, single men, and blue-collar workers. The underpayment of Hispanics appears to have increased while African Americans have gone from being underpaid to being overpaid. Workers with a college degree have become overpaid (i.e., "credentialism") while "gift-exchange" efficiency wages have declined. The marginal productivity of labor input has increased but is increasingly underpaid.
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Taxation and the Allocation of Talent
Benjamin Lockwood, Charles Nathanson & Glen Weyl
University of Chicago Working Paper, April 2014
Abstract:
Income taxation affects the allocation of talent by blunting the material incentives to enter high-paying professions. If, as the literature suggests, the ratio of social to private product is lower in high-paying professions (e.g., finance and law) than in low-paying professions (e.g., teaching and scientific research), progressive taxation is justified even absent a redistributive motive. Optimal taxes are highly sensitive to the size of externalities, which are currently poorly measured. Under our baseline calibration drawn from the literature, the Reagan tax reforms account for a fifth of the increase in pre-tax top income shares and reduce output.
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The Draft and the Intergenerational Transmission of Human Capital
Moiz Bhai
University of Illinois Working Paper, March 2014
Abstract:
Understanding the transmission of success from generation to the next remains a salient issue for public policy. The peacetime draft in the United States provides a large scale natural experiment to explore the impacts of an intensive policy intervention. Draftees incurred large wage penalties during and beyond their initial period of military service. Economists have consequently characterized the draft as a tax. Using an instrumental variables research design with data from the Wisconsin Longitudinal Study, the present study investigates the intergenerational human capital spillovers of the draft. I find the intergenerational costs of the draft for children of men that were drafted during peacetime to be two-thirds of a year less of schooling than children of men that were not drafted. Further analysis of the effects by the gender of children reveals considerably stronger impacts on boys than girls. In contrast, children of men from the whole military sample show a negligible impact of paternal military service on their educational attainment.
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Living Among the Affluent: Boon or Bane?
Louis Tay, Mike Morrison & Ed Diener
Psychological Science, forthcoming
Abstract:
This study examined whether national income can have effects on happiness, or subjective well-being (SWB), over and above those of personal income. To assess the incremental effects of national income on SWB, we conducted cross-sectional multilevel analysis on data from 838,151 individuals in 158 nations. Although greater personal income was consistently related to higher SWB, we found that national income was a boon to life satisfaction but a bane to daily feelings of well-being; individuals in richer nations experienced more worry and anger on average. We also found moderating effects: The income-SWB relationship was stronger at higher levels of national income. This result might be explained by cultural norms, as money is valued more in richer nations. The SWB of more residentially mobile individuals was less affected by national income. Overall, our results suggest that the wealth of the nation one resides in has consequences for one's happiness.
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The Wage Premium Puzzle and the Quality of Human Capital
Milton Marquis, Bharat Trehan & Wuttipan Tantivong
International Review of Economics & Finance, September 2014, Pages 100-110
Abstract:
The wage premium for high-skilled workers in the United States, measured as the ratio of the 90th-to-10th percentiles from the wage distribution, increased by 20 percent from the 1970s to the late 1980s. A large literature has emerged to explain this phenomenon. A leading explanation is that skill-biased technological change (SBTC) increased the demand for skilled labor relative to unskilled labor. In a calibrated vintage capital model with heterogenous labor, this paper examines whether SBTC is likely to have been a major factor in driving up the wage premium. Our results suggest that the contribution of SBTC is very small, accounting for about 1/20th of the observed increase. By contrast, a gradual and very modest shift in the distribution of human capital across workers can easily account for the large observed increase in wage inequality.
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Is Universal Child Care Leveling the Playing Field?
Tarjei Havnes & Magne Mogstad
Journal of Public Economics, forthcoming
Abstract:
We assess the case for universal child care programs in the context of a Norwegian reform which led to a large-scale expansion of subsidized child care. We use non-linear difference-in-differences methods to estimate the quantile treatment effects of the reform. We find that the effects of the child care expansion were positive in the lower and middle part of the earnings distribution of exposed children as adults, and negative in the uppermost part. We complement this analysis with local linear regressions of the child care effects by family income. We find that most of the gains in earnings associated with the universal child care program relate to children of low income parents, whereas upper-class children actually experience a loss in earnings. In line with the differential effects by family income, we estimate that the universal child care program substantially increased intergenerational income mobility. To interpret the estimated heterogeneity in child care effects, we examine the mediating role of educational attainment and cognitive test scores, and show that our estimates are consistent with a simple model where parents make a tradeoff between current family consumption and investment in children. Taken together, our findings could have important implications for the policy debate over universal child care programs, suggesting that the benefits of providing subsidized child care to middle and upper-class children are unlikely to exceed the costs. Our study also points to the importance of universal child care programs in explaining differences in earnings inequality and income mobility across countries and over time.
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Miles Corak, Matthew Lindquist & Bhashkar Mazumder
Labour Economics, forthcoming
Abstract:
We use new estimators of directional rank mobility developed by Bhattacharya and Mazumder (2011) to compare rates of upward and downward intergenerational mobility across three countries: Canada, Sweden and the United States. These measures overcome some of the limitations of traditional measures of intergenerational mobility such as the intergenerational elasticity, which are not well suited for analyzing directional movements or for examining differences in mobility across the income distribution. Data for each country include highly comparable, administrative data sources containing sufficiently long time spans of earnings. Our most basic measures of directional mobility, which simply compare whether sons moved up or down in the earnings distribution relative to their fathers, do not differ much across the countries. However, we do find that there are clear differences in the extent of the movement. We find larger cross-country differences in downward mobility from the top of the distribution than upward mobility from the bottom. Canada has the most downward mobility while the U.S. has the least, with Sweden in the middle. We find some differences in upward mobility but these are somewhat smaller in magnitude. An important caveat is that our analysis may be sensitive to the concept of income we use and broader measures such as family income could lead to different conclusions. Also, small differences in rank mobility translate into rather large differences in absolute mobility measured in dollars, due to large differences in income inequality across countries.
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Income inequality in today's China
Yu Xie & Xiang Zhou
Proceedings of the National Academy of Sciences, 13 May 2014, Pages 6928-6933
Abstract:
Using multiple data sources, we establish that China's income inequality since 2005 has reached very high levels, with the Gini coefficient in the range of 0.53-0.55. Analyzing comparable survey data collected in 2010 in China and the United States, we examine social determinants that help explain China's high income inequality. Our results indicate that a substantial part of China's high income inequality is due to regional disparities and the rural-urban gap. The contributions of these two structural forces are particularly strong in China, but they play a negligible role in generating the overall income inequality in the United States, where individual-level and family-level income determinants, such as family structure and race/ethnicity, play a much larger role.
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The Great Compression of the French Wage Structure, 1969-2008
Gregory Verdugo
Labour Economics, June 2014, Pages 131-144
Abstract:
Wage inequality decreased continuously in France from 1969 to 2008. In contrast to the US and the UK, this period was also characterised by a substantial increase in the educational attainment of the labour force. This paper investigates whether differences in the timing of educational expansion over the last forty years can explain the divergent evolution of upper tail wage inequality in France relative to other countries. Using a model with imperfect substitution between experience groups, the estimates suggest that the rapid increase in the supply of educated workers during the 1970s and 1990s produced a substantial decline in the skill premium within cohorts. As a result, between a third and half of the decline in wage inequality at the top of the distribution in France during this period is explained by the increase in the educational attainment of the labour force.
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Using vehicle value as a proxy for income: A case study on Atlanta's I-85 HOT lane
Sara Khoeini & Randall Guensler
Research in Transportation Economics, forthcoming
Abstract:
In the two previous decades, high-occupancy toll (HOT) lanes have been used to provide shorter and reliable travel option utilizing congestion pricing. To investigate the disproportionate distribution of the HOT lane benefits among demographic groups, previous studies have conducted surveys from a small portion of the travelers. Considering the high cost and time-intensiveness of surveys, this study proposes the application of vehicle value as a proxy for income on the Atlanta I-85 HOT corridor. More than 300,000 license-plate records were collected across all the lanes during peak periods of spring and summer 2012. The State vehicle registration database was employed to obtain vehicle characteristics from license-plate observations, which were then processed to estimate vehicle value. The results show that there is 23% difference between average vehicle value across HOT lane and general purpose lanes. To support the proposed methodology, the research team used targeted market income data which demonstrates notably similar trends of differences across the lanes. This study once again rejects the concept of "Lexus Lane" by illustrating that significant amount of low-income users are using the HOT lane; however, very high income travelers are using HOT lane twice as frequent as low-income travelers.
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Christopher Boudreaux
Journal of Institutional Economics, June 2014, Pages 231-255
Abstract:
Income inequality is often attributed to declines in income mobility following the Great Gatsby curve, but this relationship is of secondary importance in determining the factors of income mobility if one considers that changing rules is more important than changing outcomes under defined rules. Rather, improvements in institutional quality are hypothesized to increase income mobility by allowing entrepreneurs the freedom to pursue their dreams. This paper is the first to empirically analyze the institutional determinants behind entrepreneurship, and their effect on income mobility. The findings from a cross-country analysis suggest that secure property rights and less corruption are associated with less income persistence, leading to higher income mobility, independent of the Great Gatsby effect. This suggests that reducing corruption and protection of property rights increase income mobility through the channels of entrepreneurship.
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Jan Delhey & Georgi Dragolov
European Sociological Review, April 2014, Pages 151-165
Abstract:
Are more equal societies 'better' societies? This article addresses the question as to whether and why income inequality lowers the degree of Europeans' subjective well-being. While in broad international comparisons typically no clear-cut link between income inequality and (un)happiness exists, we can demonstrate that Europeans are somewhat less happy in more unequal places. We further discuss and empirically test three explanations as to why Europeans are inequality-averse, namely (dis)trust, status anxiety, and perceived conflicts. Each of these three potential mediators is hypothesized to be shaped by the extent of a nation's income inequality, and in turn to result in lower subjective well-being. A multilevel mediation analysis with data from the European Quality of Life Survey 2007 for 30 countries reveals that distrust and status anxiety are important mediators of inequality aversion, whereas perceived conflict is not. We can further show that trust is the crucial mediator among affluent societies, whereas status anxiety is crucial among the less affluent societies. The results are discussed with reference to the Spirit Level theory developed by Richard Wilkinson and Kate Pickett.
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Field experiments of success-breeds-success dynamics
Arnout van de Rijt et al.
Proceedings of the National Academy of Sciences, 13 May 2014, Pages 6934-6939
Abstract:
Seemingly similar individuals often experience drastically different success trajectories, with some repeatedly failing and others consistently succeeding. One explanation is preexisting variability along unobserved fitness dimensions that is revealed gradually through differential achievement. Alternatively, positive feedback operating on arbitrary initial advantages may increasingly set apart winners from losers, producing runaway inequality. To identify social feedback in human reward systems, we conducted randomized experiments by intervening in live social environments across the domains of funding, status, endorsement, and reputation. In each system we consistently found that early success bestowed upon arbitrarily selected recipients produced significant improvements in subsequent rates of success compared with the control group of nonrecipients. However, success exhibited decreasing marginal returns, with larger initial advantages failing to produce much further differentiation. These findings suggest a lesser degree of vulnerability of reward systems to incidental or fabricated advantages and a more modest role for cumulative advantage in the explanation of social inequality than previously thought.
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Preschoolers Reduce Inequality While Favoring Individuals With More
Vivian Li, Brian Spitzer & Kristina Olson
Child Development, May/June 2014, Pages 1123-1133
Abstract:
Inequalities are everywhere, yet little is known about how children respond to people affected by inequalities. This article explores two responses - minimizing inequalities and favoring those who are advantaged by them. In Studies 1a (N = 37) and 1b (N = 38), 4- and 5-year-olds allocated a resource to a disadvantaged recipient, but judged advantaged recipients more positively. In Studies (N = 38) and (N = 74), a delay occurred between seeing the inequality and allocating resources, or stating a preference, during which time participants forgot who was initially more advantaged. Children then favored advantaged recipients on the preference and resource allocation measures, suggesting an implicit "affective tagging" mechanism drives the tendency to favor the advantaged. In contrast, reducing inequalities through resource allocation appears to require explicit reasoning.
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Silvia Moscatelli et al.
Journal of Personality and Social Psychology, forthcoming
Abstract:
This research examines for the 1st time the effects of relative deprivation and relative gratification, based on social comparison, on implicit and overt forms of discrimination toward the outgroup in a minimal group setting. Study 1 showed that compared to a control condition, relative deprivation and relative gratification enhanced implicit discrimination - measured through variations of linguistic abstraction in intergroup descriptions. Whereas both relative deprivation and relative gratification produced linguistic ingroup favoritism, linguistic productions of relatively deprived groups also conveyed outgroup derogation. Study 2 showed that relatively deprived and relatively gratified groups were overtly discriminatory in intergroup allocations of negative outcomes. The effects of relative deprivation were mediated by perceived intergroup rivalry and, in part, by perceived common fate. Perceived common fate partly accounted for the effects of relative gratification. Study 3 focused on mediators of relative gratification. First, members of relatively gratified (vs. control) groups worried about losing the ingroup advantage, which together worked as sequential mediators of discrimination. Second, relatively gratified groups reported higher existential guilt, which, in turn, was related to expectations of discrimination by the relatively deprived outgroup, and these sequentially mediated the effects of relative gratification. Overall, these studies highlight that both relative deprivation and relative gratification enhance intergroup discrimination and contribute to the understanding of the underlying processes.
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Numerosity effects in income inequality perceptions: Why relative increases in income seem bad
Christophe Lembregts & Mario Pandelaere
Journal of Economic Psychology, forthcoming
Abstract:
Most research on income inequality implicitly assumes that a fixed percentage increase in income across all income levels does not alter income inequality. In contrast with this assumption, we show that relative increases in income lead to increased perceptions of inequality, even when buying power is held constant. In a second experiment, we extended these findings using a fictitious currency, thereby eliminating effects of using a familiar currency. In study 3, we demonstrate that feelings of envy and fairness are affected by a fixed percentage income increase.
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Inequality in democracies: Testing the classic democratic theory of redistribution
Brandon Pecoraro
Economics Letters, June 2014, Pages 398-401
Abstract:
The classic democratic theory of redistribution claims that an increase in the mean-to-median (MM) income ratio causes a majority coalition in the electorate to collectively demand more redistribution. The functional dependence of redistribution on the MM income ratio is tested in parametric and nonparametric regression frameworks using an OECD panel dataset. While the parametric regression model is found to be misspecified rendering subsequent inference invalid, the robust nonparametric regression model fails to uncover evidence that the MM income ratio is relevant for predicting redistribution.
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U.S. Pensions in the 2000s: The Lost Decade?
Edward Wolff
Review of Income and Wealth, forthcoming
Abstract:
The last three decades saw a sharp decline in traditional defined benefit (DB) pensions and a corresponding rise in defined contribution (DC) plans. Using the Survey of Consumer Finances from 1983 to 2010, I find that after robust gains in the 1980s and 1990s, pension wealth experienced a marked slowdown in growth from 2001 to 2007 and then fell in absolute terms from 2007 to 2010. Median augmented wealth (the sum of net worth, pensions, and Social Security wealth) advanced slower than median net worth from 1983 to 2007 and its inequality rose more, as DB wealth fell off. However, from 2007 to 2010, the opposite occurred. While median wealth plummeted by 41 percent and inequality spiked by 0.032 Gini points, median augmented wealth fell by only 21 percent and its Gini coefficient rose by only 0.009 points. The differences are due to the moderating influence of Social Security wealth.
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Money in the Bank: Feeling Powerful Increases Saving
Emily Garbinsky, Anne-Kathrin Klesse & Jennifer Aaker
Journal of Consumer Research, forthcoming
Abstract:
Across five studies, this research reveals that feeling powerful increases saving. This effect is driven by the desire to maintain one's current state. When the purpose of saving is no longer to accumulate money, but to spend it on a status-related product, the basic effect is reversed and those who feel powerless save more. Further, if money can no longer aid in maintaining one's current state, because power is already secure or because power is maintained by accumulating an alternative resource (e.g., knowledge), the effect of feeling powerful on saving disappears. These findings are discussed in light of their implications for research on power and saving.
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What Catches the Envious Eye? Attentional Biases Within Malicious and Benign Envy
Jan Crusius & Jens Lange
Journal of Experimental Social Psychology, forthcoming
Abstract:
We investigated how early attention allocation is biased in envy. Recent research has shown that people experience envy in two distinct forms: malicious envy, which is associated with the motivation to harm the position of a superior other, and benign envy, which is associated with the motivation to improve oneself by moving upward. Based on a functional account of the two forms of envy, we predicted that within malicious envy the cognitive system is geared more strongly toward the other person than toward the superior fortune of the other. In contrast, only within benign envy the cognitive system should be geared toward opportunities to level oneself up. We investigated these hypotheses with dot probe tasks. In line with our reasoning, Experiments 1 (N = 84) and 2 (N = 78) demonstrate that within malicious envy, attention is biased more toward the envied person than toward the envy object, whereas in benign envy, this difference does not occur. Experiment 3 (N = 104) provides evidence that within benign envy, but not in malicious envy, attention is biased toward means to improve one's own outcome. The results suggest that within benign and malicious envy, early cognitive processing is tuned toward different stimuli and thus highlight the utility of functional and process-oriented approaches to studying envy.
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Living the high life: Social status influences real estate decision making
Sarah Tower-Richardi et al.
Journal of Applied Social Psychology, forthcoming
Abstract:
Social status is associated with the vertical spatial dimension, with people conceptualizing higher social status with higher vertical positions. Two experiments tested whether this association influences relatively real-world decisions about others by asking participants to act as real estate agents, aiding in the relocation of clients who explicitly or implicitly varied in social status. Across experiments, higher status clients were placed into higher elevation housing options. This influence of social status persisted when strategy-aware participants were removed from analysis, and was not influenced by individual differences in social dominance or locus of control. Abstract concepts of social status are understood through associations with vertical space, and these mapping of abstract concepts to concrete percepts prove influential in guiding daily decisions.
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Switching Regression Estimates of the Intergenerational Persistence of Consumption
Sheng Guo
Economic Inquiry, forthcoming
Abstract:
The influential economic theory of intergenerational transfers predicts a negative connection between credit constraints and intergenerational mobility of consumption. Existing work has used bequest receipt to signal a parent's access to credit markets when investing in his children's human capital. However, measurement error in bequest receipt generates misclassification error and, in turn, attenuation bias. Employing switching regressions with imperfect sample separation to deal with this error, we show that the intergenerational persistence of consumption in the United States for credit constrained families is much higher than that for unconstrained families, contrary to what the theory implies. This means that children from constrained families are more likely to have consumption levels similar to those of their parents than children from unconstrained families. Our results are robust to the choice of bequest variables and other predictive variables in the switching equation.
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Instability and Concentration in the Distribution of Wealth
Ricardo Fernholz & Robert Fernholz
Journal of Economic Dynamics and Control, forthcoming
Abstract:
We consider a setup in which infinitely-lived households face idiosyncratic investment risk and show that in this case the equilibrium distribution of wealth becomes increasingly right-skewed over time until wealth concentrates entirely at the top. The households in our setup are identical in terms of their patience and their abilities, and we assume that there are no redistributive mechanisms - neither explicit in the form of government tax or fiscal policies, nor implicit in the form of limited intergenerational transfers. Our results demonstrate that the presence of such redistributive mechanisms alone ensures the stability of the distribution of wealth over time.
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Molecular genetic contributions to socioeconomic status and intelligence
Riccardo Marioni et al.
Intelligence, May-June 2014, Pages 26-32
Abstract:
Education, socioeconomic status, and intelligence are commonly used as predictors of health outcomes, social environment, and mortality. Education and socioeconomic status are typically viewed as environmental variables although both correlate with intelligence, which has a substantial genetic basis. Using data from 6815 unrelated subjects from the Generation Scotland study, we examined the genetic contributions to these variables and their genetic correlations. Subjects underwent genome-wide testing for common single nucleotide polymorphisms (SNPs). DNA-derived heritability estimates and genetic correlations were calculated using the 'Genome-wide Complex Trait Analyses' (GCTA) procedures. 21% of the variation in education, 18% of the variation in socioeconomic status, and 29% of the variation in general cognitive ability was explained by variation in common SNPs (SEs ~ 5%). The SNP-based genetic correlations of education and socioeconomic status with general intelligence were 0.95 (SE 0.13) and 0.26 (0.16), respectively. There are genetic contributions to intelligence and education with near-complete overlap between common additive SNP effects on these traits (genetic correlation ~ 1). Genetic influences on socioeconomic status are also associated with the genetic foundations of intelligence. The results are also compatible with substantial environmental contributions to socioeconomic status.
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Voters, dictators, and peons: Expressive voting and pivotality
Emir Kamenica & Louisa Egan Brad
Public Choice, April 2014, Pages 159-176
Abstract:
Why do the poor vote against redistribution? We examine one explanation experimentally, namely that individuals gain direct expressive utility from voting in accordance with their ideology and understand that they are unlikely to be pivotal; hence, their expressive utility, even if arbitrarily small, determines their voting behavior. In contrast with a basic prediction of this model, we find that the probability of being pivotal does not affect the impact of monetary interest on whether a subject votes for redistribution.
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Evidence for Two Facets of Pride in Consumption: Findings From Luxury Brands
Brent McFerran, Karl Aquino & Jessica Tracy
Journal of Consumer Psychology, forthcoming
Abstract:
This paper documents the multifaceted nature of pride in consumer behavior. Drawing on recent psychological research on pride, we provide evidence for two separate facets of pride in consumption. In a series of studies, we propose a model wherein luxury brand consumption and pride are systematically interrelated. Whereas authentic (but not hubristic) pride leads to a heightened desire for luxury brands, hubristic (but not authentic) pride is the outcome of these purchases, and is the form of pride signaled to observers by these purchases. Further, we show that these effects are generally exacerbated for those low in narcissism. These findings shed new light on why consumers purchase luxury brands, highlighting a paradox: these purchases are sought out of heightened feelings of accomplishment (and not arrogance), but they instead signal arrogance to others (rather than accomplishment).
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Low-status aversion: The effect of self-threat on willingness to buy and sell
Caitlin Pan et al.
Journal of Applied Social Psychology, forthcoming
Abstract:
Consumption decisions are inherently rooted in both what to consume and what to forgo. Although prior research has focused on consumption, we instead examine what compels consumers to steer clear of particular goods. In two studies, we demonstrated that individuals experiencing self-threat avoid low-status goods to prevent further damage to their self-worth. Individuals facing self-threat showed a decreased willingness to buy (Study 1), and a correspondingly greater willingness to sell (Study 2) low-status goods, as compared with nonthreatened individuals. Notably, these effects emerged even when such behaviors were associated with economic costs (Study 2). Together, these results highlight how the motive to preserve the self can affect market exchanges, thereby painting a more complete portrait of the relationship between consumption, status, and the self.