Community Income Inequality and the Economic Gap in Participation
James Szewczyk & Melody Crowder-Meyer
Political Behavior, forthcoming
This paper reveals how community-level income inequality affects political participation. We theorize that local experiences of inequality increase awareness of the unequal distribution of income in the US, provoking political activity, particularly among those with more resources enabling them to act. Using restricted geographic data from the 2012 and 2016 ANES, we show local income inequality increases political participation, especially among the affluent. Using an instrumental variables design, we demonstrate these findings are not the result of reverse causality. Our results reveal the importance of considering both individual- and community-level factors when evaluating political behavior. They also suggest that as income inequality in the US continues to rise, so too will the gap in political participation between the rich and the poor, potentially leading elected officials to be even less responsive to the preferences and needs of the less affluent.
Aggregate wealth and its distribution as determinants of financial crises
Journal of Economic Inequality, September 2020, Pages 319-338
This paper investigates the relationship between wealth inequality and financial crises. While substantiation of a role for income inequality remains ambiguous in the literature, evidence is presented suggesting a positive relationship between the interaction of wealth inequality with aggregate wealth on systemic financial crises. The evidence is based on panel data for nine countries, some of which expand into the last century, and a linear probability model estimated with country and year fixed effects. The relationship is consistent when accounting for overall financial sector size, credit growth, the money supply, current account, asset bubbles, and robust to estimation method. No significant role is found for income inequality. Predicted probabilities of financial crisis closely track the incidence of financial crises over the last century, remarkably so when compared against a leading benchmark model. It is argued that the empirical relationship between wealth inequality, aggregate wealth and financial crises reveals an important role for the distribution of accumulated assets in the macro-financial stability of rich countries. The distribution of stocks may capture structural vulnerabilities that the distribution of flows cannot expose, and hence more unequal countries in wealth face greater financial instability. An economic network hypothesis is proposed for interpreting the empirical results.
The Possession of High Status Strengthens the Status Motive
Cameron Anderson, John Angus Hildreth & Daron Sharps
Personality and Social Psychology Bulletin, forthcoming
The current research tested whether the possession of high status, compared with the possession of low status, makes individuals desire having high status even more. Five studies (total N = 6,426), four of which were preregistered, supported this hypothesis. Individuals with higher status in their social groups or who were randomly assigned to a high-status condition were more motivated to have high status than were individuals with low status. Furthermore, upper-class individuals had a stronger status motive than working-class individuals, in part, due to their high status. High-status individuals had a stronger status motive, in part, because they were more confident in their ability to achieve (or retain) high status, but not because of other possible mechanisms (e.g., task self-efficacy). These findings provide a possible explanation for why status hierarchies are so stable and why inequality rises in social collectives over time.
Cognitive Barriers to Reducing Income Inequality
Joshua Conrad Jackson & Keith Payne
Social Psychological and Personality Science, forthcoming
As economic inequality grows, more people stand to benefit from wealth redistribution. Yet in many countries, increasing inequality has not produced growing support for redistribution, and people often appear to vote against their economic interest. Here we suggest that two cognitive tendencies contribute to these paradoxical voting patterns. First, people gauge their income through social comparison, and those comparisons are usually made to similar others. Second, people are insensitive to large numbers, which leads them to underestimate the gap between themselves and the very wealthy. These two tendencies can help explain why subjective income is normally distributed (therefore most people think they are middle class) and partly explain why many people who would benefit from redistribution oppose it. We support our model's assumptions using survey data, a controlled experiment, and agent-based modeling. Our model sheds light on the cognitive barriers to reducing inequality.
The color of class politics: Economic position, racial resentment, and attitudes about redistribution
Andrew Bloeser & Tarah Williams
Politics, Groups, and Identities, forthcoming
Racial resentment has been linked to opposition towards welfare programs for the poor and other redistributive policies. Theoretical work implies that because redistributive polices have been rhetorically linked to negative racial stereotypes, racially resentful whites will oppose redistributive policies, even when they might benefit from them. However, this proposition has not been empirically tested. Using the 2016 American National Election Study, we examine whether the relationship between racial resentment and a variety of economic policy attitudes is conditional by individuals' income level. We find that the relationship between racial resentment and opposition to redistribution is weaker for lower income whites than for whites with higher incomes. When it comes to redistributive preferences, economic self-interest tempers the influence of racial resentment for lower income whites. For whites with higher incomes, however, the influence of racial resentment on redistributive preferences is significantly larger. This indicates that in the absence of directly benefiting from a redistributive policy, whites will oppose it if they harbor racial antipathy. We exploit the time series design of the ANES to demonstrate that these patterns hold across multiple election cycles (2004-2016).
Corina Boar & Virgiliu Midrigan
NBER Working Paper, July 2020
We ask: what are the most efficient means of redistribution in an unequal society? We answer this question by characterizing the optimal shape of non-linear income and wealth taxes in a dynamic general equilibrium model with uninsurable idiosyncratic risk. Our analysis reproduces the distribution of income and wealth in the United States and explicitly takes into account the long-lived transition dynamics after policy reforms. We find that a uniform flat tax on capital and labor income combined with a lump-sum transfer is nearly optimal. Though taxing wealth and allowing for increasing marginal income tax schedules raises utilitarian welfare, the incremental gains from doing so are small. This result is robust to changing household preferences, the distribution of ability, the planner's preference for redistribution, as well as to explicitly modeling private business ownership and the ensuing heterogeneity in rates of return across financially constrained entrepreneurs.
Does economic inequality undermine political equality? Testing two common assumptions
Electoral Studies, forthcoming
In recent years, scholars have expressed concern that democratic political systems are more responsive to rich citizens than to poor citizens under conditions of economic inequality. However, it is unclear whether economic inequality leads to unequal influence on government. Moreover, despite claims that proportional representation reduces inequalities in representation, there is no evidence that it does. I test these two prominent claims by connecting two types of citizens' preferences to the composition of government in non-presidential systems using the Comparative Study of Electoral Systems (CSES) dataset. I find that rich citizens gain better representation in government than the poor more often than the reverse. However, I find no evidence of an association between economic inequality and inequalities in representation or that proportional representation influences income gaps in representation.
Time and class: How socioeconomic status shapes conceptions of the future self
Stephen Antonoplis & Serena Chen
Self and Identity, forthcoming
People generally care about their future. However, how vividly they imagine it, and how much they like and value it, may vary across socioeconomic status (SES). If lower-SES individuals believe their future to resemble their present, including the greater uncertainties and stressors of a lower-SES environment, then they may focus less on their future self, coming to view it less vividly, as less likable, and less valuable, amongst other qualities. We found support for these hypotheses across pilot data, two observational studies (one pre-registered), and a pre-registered experimental manipulation of SES. These results add to the growing literature on SES's psychological consequences by suggesting that SES affects people's conceptions of not only their present self, but also their future self.
Reducing Unequal Representation: The Impact of Labor Unions on Legislative Responsiveness in the U.S. Congress
Michael Becher & Daniel Stegmueller
Perspectives on Politics, forthcoming
It has long been recognized that economic inequality may undermine the principle of equal responsiveness that lies at the core of democratic governance. A recent wave of scholarship has highlighted an acute degree of political inequality in contemporary democracies in North America and Europe. In contrast to the view that unequal responsiveness in favor of the affluent is nearly inevitable when income inequality is high, we argue that organized labor can be an effective source of political equality. Focusing on the paradigmatic case of the U.S. House of Representatives, our novel dataset combines income-specific estimates of constituency preferences based on 223,000 survey respondents matched to roll-call votes with a measure of district-level union strength drawn from administrative records. We find that local unions significantly dampen unequal responsiveness to high incomes: a standard deviation increase in union membership increases legislative responsiveness towards the poor by about six to eight percentage points. As a result, in districts with relatively strong unions legislators are about equally responsive to rich and poor Americans. We rule out alternative explanations using flexible controls for policies, institutions, and economic structure, as well as a novel instrumental variable for unionization based on history and geography. We also show that the impact of unions operates via campaign contributions and partisan selection.
Do rich people "deserve" to be rich? Charitable giving, internal attributions of wealth, and judgments of economic deservingness
Juliana Black & Shai Davidai
Journal of Experimental Social Psychology, forthcoming
People often judge how much "the rich" deserve to be rich by taking into consideration how they had made their wealth. How do people make such judgments about the origins of others' wealth? In nine studies (N = 1707) and two supplemental analyses (N = 197), we examine whether the attributions people make about wealth are influenced by the way wealthy people spend their money. We find that people are more likely to attribute economic success to internal factors (such as hard work and competence) when "the rich" spend their money charitably versus when they spend it in a more luxurious manner. Moreover, we find that the tendency to attribute wealth to internal factors is due to judgments about wealthy individuals' character, and that the influence of spending on trait attribution is substantially larger for merit-related traits (e.g., persistence or industriousness) than other positive traits that are unrelated to merit (e.g., elegance or youthfulness). Finally, we find that how "the rich" spend their fortunes influences beliefs about how much they deserve to be rich. The more wealthy people give their money to charity, the more people believe that they deserve to have it in the first place.
In a Representative Sample Grit Has a Negligible Effect on Educational and Economic Success Compared to Intelligence
Chen Zissman & Yoav Ganzach
Social Psychological and Personality Science, forthcoming
We compare the relative contribution of grit and intelligence to educational and job-market success in a representative sample of the American population. We find that, in terms of ΔR 2, intelligence contributes 48-90 times more than grit to educational success and 13 times more to job-market success. Conscientiousness also contributes to success more than grit but only twice as much. We show that the reason our results differ from those of previous studies which showed that grit has a stronger effect on success is that these previous studies used nonrepresentative samples that were range restricted on intelligence. Our findings suggest that although grit has some effect on success, it is negligible compared to intelligence and perhaps also to other traditional predictors of success.
Understanding 100 Years of the Evolution of Top Wealth Shares in the U.S.: What is the Role of Family Firms?
Andrew Atkeson & Magnus Irie
NBER Working Paper, July 2020
We use a simple random growth model to study the role of changing dynamics of family firms in shaping the evolution of top wealth shares in the United States over the course of the past century. Our model generates a time path for top wealth shares remarkably similar to those found by Saez and Zucman (2016) and Gomez (2019) when the volatility of idiosyncratic shocks to the value of family firms is similar to that found for public firms by Herskovic, Kelly, Lustig, and Van Nieuwerburgh (2016) over the past 100 years. We also show that consideration of family firms contributes not only to overall wealth inequality, but also to considerable upward and downward mobility of families within the distribution of wealth. We interpret our results as indicating that improving our understanding of the economics of the process by which families found new firms and then, eventually, diversify their wealth is central to improving our understanding of the distribution of great wealth and its evolution over time.
Stratified zoning in central cities
Journal of Housing Economics, forthcoming
I model a central city where citizens differ by income, and housing confers benefits on neighbors. Zoning separates citizens into neighborhoods by income. This maximizes total surplus and facilitates redistributing gains to a majoritarian governing coalition of citizens, which changes from rich to poor as the city grows. Non-members of the coalition may form suburbs. These theoretical results are supported by empirical facts compiled by Schnore and Varley (1955). It is difficult to justify stratified zoning on Paretian grounds, even when a municipal government can redistribute income. If stratified zoning is not a Pareto improvement before gains are redistributed, it will not be afterward under majority rule. Gains in total surplus increase as the distribution of income becomes less equal, which helps explain why neighborhood stratification has outpaced stratification of income in U.S cities in recent decades, as documented by Booza et al (2006) and Sampson (2016).
Why Class Formation Occurs in Humans but Not among Other Primates: A Primate Coalitions Model
Sagar Pandit, Gauri Pradhan & Carel van Schaik
Human Nature, June 2020, Pages 155-173
Most human societies exhibit a distinct class structure, with an elite, middle classes, and a bottom class, whereas animals form simple dominance hierarchies in which individuals with higher fighting ability do not appear to form coalitions to "oppress" weaker individuals. Here, we extend our model of primate coalitions and find that a division into a bottom class and an upper class is inevitable whenever fitness-enhancing resources, such as food or real estate, are exploitable or tradable and the members of the bottom class cannot easily leave the group. The model predicts that the bottom class has a near flat, low payoff and always comprises at least half the society. The upper class may subdivide into one or more middle class(es), resulting in improved payoff for the topmost members (elite). The model predicts that the bottom class on its own is incapable of mounting effective counter-coalitions against the upper class, except when receiving support from dissatisfied members of the middle class(es). Such counter-coalitions can be prevented by keeping the payoff to the lowest-ranked members of the middle classes (through concessions) well above that of the bottom class. This simple model explains why classes are also absent in nomadic hunter-gatherers and predominate in (though are not limited to) societies that produce and store food. Its results also agree well with various other known features of societies with classes.