More and Less

Kevin Lewis

July 07, 2022

The privileged liberal principle-implementation gap: How the personal behavior of privileged liberals contributes to social inequality
Demis Glasford
Journal of Applied Social Psychology, forthcoming

Much of the work on the development and maintenance of group inequality has focused on a select number of advantaged groups, resulting in a “blind spot” regarding the role of liberals in contributing to social inequality. The present work tests for a privileged liberal principle-implementation gap, the notion that under conditions that make personal stake salient privileged liberals exhibit a gap between their self-reported principles and behavioral tendencies. The studies focus on three areas critical to inequality: employment (i.e., affirmative action; Studies 1a and 4), education (i.e., equal access to education for the working class; Study 1b), and housing (i.e., access to affordable housing; Study 1c), as well as support for the homeless (Studies 2 and 3). The results demonstrate that privileged liberals report higher principles to reduce inequality compared to conservatives, but in settings with salient personal stake exhibit no differences in behavior compared to conservatives. The findings also provide direct experimental evidence for the role of personal stake in shaping the privileged liberal P-I gap. Implications for the study of inequality and impact on Black/Brown working-class communities, as well as a class-based approach to social change, are discussed.

Markups Across the Income Distribution: Measurement and Implications
Kunal Sangani
Harvard Working Paper, April 2022

The Law of Diminishing Elasticity of Demand (Harrod 1936) conjectures that price elasticity declines with income. I provide empirical evidence in support of Harrod's conjecture using data on household transactions and wholesale costs. Over the observed set of purchases, high-income households pay 9pp higher retail markups than low-income households. Half of the differences in markups paid across households is due to differences in markups paid at the same store. Conversely, products with a high-income customer base charge higher markups: a 10pp higher share of customers with over $100K in income is associated with a 2.5–5.2pp higher retail markup. A search model in which households' search intensity depends on their opportunity cost of time can replicate these facts. Through the lens of the model, changes in the income distribution since 1950 account for a 9pp rise in retail markups, with one-third of the increase due to growing income dispersion. This rise in markups consists of within-firm markup increases as well as a reallocation of sales to high-markup firms, which occurs without any changes to the nature of firm production or competition.

Equal Treatment and the Inelasticity of Tax Policy to Rising Inequality
Kenneth Scheve & David Stasavage
Comparative Political Studies, forthcoming

We argue that tax policy typically does not respond to inequality because many voters hold equal treatment fairness beliefs for which the expectation is that, just as all have one vote, the state should treat citizens equally on other dimensions of policy. In the tax domain, this means all should pay the same rate. We propose a new survey instrument to measure equal treatment beliefs and implement it in surveys in Germany, the United Kingdom, and the United States. We document in all three countries a robust negative partial correlation between the strength of individual equal treatment beliefs and preferences for higher taxes on the rich. We also present results from a survey experiment in the United States that exposes respondents to a violation of equal treatment beliefs — voting weighted by educational attainment. Exposure to this treatment both increases the strength of equal treatment beliefs and decreases support for progressive taxation. 

Income Inequality and Job Creation
Donggyu Lee, Sebastian Doerr & Thomas Drechsel
Federal Reserve Working Paper, June 2022

This paper shows that changes in top income shares affect job creation at firms of different sizes. Highincome households save relatively more in stocks and bonds, and relatively less in bank deposits. We propose that a higher share of income accruing to top earners therefore channels funds to large firms, but tightens financing conditions for small, bank-dependent firms. In turn, small firms create fewer jobs than large firms. Exploiting variation in top incomes across U.S. states and an instrumental variable strategy, we estimate that a 10 percentage point (p.p.) increase in the income share of the top 10 percent reduces the net job creation rate of small firms by 2.5 p.p. relative to large firms. Very small firms and those in bank-dependent industries are most affected. Experiments in a quantitative macro model show that growing top incomes account for 16 percent of the overall decline in the employment share of small firms since 1980. The model also reveals that not taking into account the link between inequality and job creation understates the welfare effects of income redistribution.

Wrecked by Success? Not to Worry
Harrison Kell et al.
Perspectives on Psychological Science, forthcoming

We examined the wrecked-by-success hypothesis. Initially formalized by Sigmund Freud, this hypothesis has become pervasive throughout the humanities, popular press, and modern scientific literature. The hypothesis implies that truly outstanding occupational success often exacts a heavy toll on psychological, interpersonal, and physical well-being. Study 1 tested this hypothesis in three cohorts of 1,826 high-potential, intellectually gifted individuals. Participants with exceptionally successful careers were compared with those of their gender-equivalent intellectual peers with more typical careers on well-known measures of psychological well-being, flourishing, core self-evaluations, and medical maladies. Family relationships, comfort with aging, and life satisfaction were also assessed. Across all three cohorts, those deemed occupationally outstanding individuals were similar to or healthier than their intellectual peers across these metrics. Study 2 served as a constructive replication of Study 1 but used a different high-potential sample: 496 elite science/technology/engineering/mathematics (STEM) doctoral students identified in 1992 and longitudinally tracked for 25 years. Study 2 replicated the findings from Study 1 in all important respects. Both studies found that exceptionally successful careers were not associated with medical frailty, psychological maladjustment, and compromised interpersonal and family relationships; if anything, overall, people with exceptionally successful careers were medically and psychologically better off.

Estimating the Effect of Rent-Seeking on Income Distribution: An Analysis of U.S. States and Counties
Vitor Melo & Stephen Miller
Public Choice, July 2022, Pages 99–114

Prior empirical research on rent seeking has focused on estimating its effects on overall macroeconomic performance, with few studies attentive to income distribution. This paper expands on existing research by evaluating rent seeking’s effects on Gini coefficients, and income shares at the US state and county levels. We explore county-level panel data from the Census of Employment & Wages, adopting the percentages of workers employed in legal services and local government as proxies for rent seeking. We find that the estimated effects of rent seeking on the income distribution are significant and positive at all levels of analysis. However, rent seeking’s impact on the distribution of income is much more prominent at the state than at the county level. The results also suggest that the effect of rent seeking on the income distribution works by different mechanisms at the county level than it does at the state level. 

If I Could Do It, So Can They: Among the Rich, Those With Humbler Origins are Less Sensitive to the Difficulties of the Poor
Hyunjin Koo, Paul Piff & Azim Shariff
Social Psychological and Personality Science, forthcoming

Americans venerate rags-to-riches stories. Here we show that people view those who became rich more positively than those born rich and expect the Became Rich to be more sympathetic toward social welfare (Studies 1a and b). However, we also find that these intuitions are misguided. Surveys of wealthy individuals (Studies 2a and b) reveal that, compared with the Born Rich, the Became Rich perceive improving one’s socioeconomic conditions as less difficult, which, in turn, predicts less empathy for the poor, less perceived sacrifices by the poor, more internal attributions for poverty, and less support for redistribution. Corroborating this, imagining having experienced upward mobility (vs. beginning and staying at the top) causes people to view such mobility as less difficult, reducing empathy and support for those failing to move up (Study 3). These findings suggest that becoming rich may shift views about the poor in ways that run counter to common intuitions and cultural assumptions. 

The developmental origins and behavioral consequences of attributions for inequality
Antonya Marie Gonzalez, Lucía Macchia & Ashley Whillans
Journal of Experimental Social Psychology, July 2022

Attributions, or lay explanations for inequality, have been linked to inequality-relevant behavior. In adults and children, attributing inequality to an individual rather than contextual or structural causes is linked to greater support for economic inequality and less equitable giving. However, few studies have directly examined the relationship between parent and child attributions for inequality. Additionally, it remains unclear whether attributing inequality to individually controllable sources such as effort might lead children to allocate resources more inequitably than individually uncontrollable sources like innate ability. Across three studies (N = 698), we examine the developmental origins and behavioral consequences of inequality beliefs by exploring parent and children's (7–14 years old) attributions for unequal situations. In Study 1, parents, recruited through MTurk, preferred to explain inequality to their children by attributing disparities to effort rather than uncontrollable causes such as ability or luck. In Study 2, in a sample of affluent and mostly white families in Vancouver and Boston, parent attributions for inequality predicted children's attributions, such that children were more than two times as likely to attribute inequality to effort when their parents did. In Study 3, when a convenience sample of children from Washington state were brought to the laboratory and told that an inequality between two groups was due to effort, they were more likely to perpetuate the inequality by giving to the individual who already had more resources. This research documents a cycle of inequality perpetuation by demonstrating that parent attributions for inequality predict their children's attributions and that these attributions affect children's equitable giving. This work highlights the importance of examining the perceived controllability of inequality. 

Rising childhood income inequality and declining Americans’ health
Hui Zheng et al.
Social Science & Medicine, June 2022 

Morbidity and mortality are on the rise among Baby Boomers and younger cohorts. This study investigates whether this unfavorable health trend across birth cohorts 1925–1999 is related to rising income inequality Americans face during childhood. We use two nationally representative datasets: National Health and Nutrition Examination Surveys (NHANES) 1988–2018 and Panel Studies of Income Dynamics (PSID) 1968–2013, and two health outcomes: biomarkers of physiological dysregulation, and a chronic disease index. Childhood income inequality is measured by the average of the Gini index at the national level each birth cohort is exposed to between birth and age 18, where the Gini index from 1925 to 2016 is computed based on Internal Revenue Service income data. By merging childhood income inequality to individual level data from NHANES or PSID based on birth cohort, we find childhood income inequality is positively associated with the risk of physiological dysregulation in adulthood for all gender and racial groups in the NHANES data. It is also significantly related to the risk of chronic disease in the PSID data. This association is robust to controls for individual level childhood health and family background, adulthood socioeconomic and marital status, and contemporary macro socioeconomic factors. More importantly, childhood income inequality exposure explains a substantial amount of variation in these two health outcomes across cohorts, a pattern not observed for other early life exposures that display negative temporal trends similar to those for childhood income inequality. This study provides important evidence that income inequality experienced during childhood may have a long-lasting negative consequence for adult health, which partially explains the adverse health trends experienced by Baby Boomers and younger cohorts in the United States.

What is the Source of the Intergenerational Correlation in Earnings?
George-Levi Gayle, Limor Golan & Mehmet Soytas
Journal of Monetary Economics, July 2022, Pages 24-45

We use a dynastic model of household behavior to estimate and decompose the correlations in earnings across generations. The estimated model can explain 75% to 80% of the observed correlation in lifetime earnings between fathers and sons, mothers and daughters, and families across generations. We find that human-capital accumulation in the labor market, the nonlinear return to part-versus full-time work, and the return to parental time investment in children are the main forces driving the intergenerational correlation in earnings. The primary mechanism through which these three sources affect the intergenerational correlation in earnings is their effects on fertility and the division of labor within the household. Assortative mating magnifies these forces.

Do Corporate Tax Cuts Increase Income Inequality?
Suresh Nallareddy, Ethan Rouen & Juan Carlos Suárez Serrato
Tax Policy and the Economy, 2022, Pages 35–91

We study the effects of corporate taxes on income inequality. Using state corporate taxes as a setting, we provide evidence that corporate tax cuts lead to increases in income inequality. This result is robust across regression, matching, and synthetic controls approaches, and to controlling for a host of potential confounders. We use Statistics of Income data from the Internal Revenue Service to explore mechanisms behind this result. We find that tax cuts lead to higher income for both top and bottom earners, but the gains to capital income for top earners exceed the gains to total income for bottom earners. This result suggests that although all earners appear to benefit from a corporate tax cut, the relation between tax cuts and inequality is positive, in part, because high-income individuals shift their compensation to reduce taxes.

State Union Density Effects on Workers’ Support for Reducing Income Inequality, 1973-2016
Shawn Perron
Social Currents, forthcoming

Research often borrows on common yet somewhat unsubstantiated beliefs that unions influence inequality attitudes among unionized and nonunionized workers. This paper draws on inequality attitude data from the General Social Survey and state-level union data from the Current Population Survey and County Business Patterns between 1973 and 2016 to test this hypothesis. Linear probability, fixed-effects, and marginal structural models estimate that a large increase in state union density moderately increases workers’ support for reducing income inequality by three to 12 percentage points. Findings lend some empirical support for the capacity of unions to influence redistributive policy and market attitudes.


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