More or Less Equal

Kevin Lewis

March 05, 2010

African Poverty is Falling...Much Faster than You Think!

Xavier Sala-i-Martin & Maxim Pinkovskiy
NBER Working Paper, February 2010

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.


Neural evidence for inequality-averse social preferences

Elizabeth Tricomi, Antonio Rangel, Colin Camerer & John O'Doherty
Nature, 25 February 2010, Pages 1089-1091

A popular hypothesis in the social sciences is that humans have social preferences to reduce inequality in outcome distributions because it has a negative impact on their experienced reward. Although there is a large body of behavioural and anthropological evidence consistent with the predictions of these theories, there is no direct neural evidence for the existence of inequality-averse preferences. Such evidence would be especially useful because some behaviours that are consistent with a dislike for unequal outcomes could also be explained by concerns for social image or reciprocity, which do not require a direct aversion towards inequality. Here we use functional MRI to test directly for the existence of inequality-averse social preferences in the human brain. Inequality was created by recruiting pairs of subjects and giving one of them a large monetary endowment. While both subjects evaluated further monetary transfers from the experimenter to themselves and to the other participant, we measured neural responses in the ventral striatum and ventromedial prefrontal cortex, two areas that have been shown to be involved in the valuation of monetary and primary rewards in both social and non-social contexts. Consistent with inequality-averse models of social preferences, we find that activity in these areas was more responsive to transfers to others than to self in the 'high-pay' subject, whereas the activity of the 'low-pay' subject showed the opposite pattern. These results provide direct evidence for the validity of this class of models, and also show that the brain's reward circuitry is sensitive to both advantageous and disadvantageous inequality.


Discipline, Docility and Disparity: A Study of Inequality and Corporal Punishment

Laurie Gould & Matthew Pate
British Journal of Criminology, March 2010, Pages 185-205

Corporal punishment as a sanction for criminal offenders has a long global history. While most North American and European countries have abandoned such methods, corporal punishment is still a mainstay of criminal justice in many parts of the world. Employing a Foucauldian framework, we posit that the distribution of social power plays a determinative role in the retention of corporal punishment practices. Using economic disparity as a proxy for social power, we find that countries with greater relative economic inequality are more likely to employ corporal punishment as a possible sanction against criminal offenders.


Does Economic Inequality Depress Electoral Participation? Testing the Schattschneider Hypothesis

Frederick Solt
Political Behavior, forthcoming

Nearly a half-century ago, E.E. Schattschneider wrote that the high abstention and large differences between the rates of electoral participation of richer and poorer citizens found in the United States were caused by high levels of economic inequality. Despite increasing inequality and stagnant or declining voting rates since then, Schattschneider's hypothesis remains largely untested. This article takes advantage of the variation in inequality across states and over time to remedy this oversight. Using a multilevel analysis that combines aspects of state context with individual survey responses in 144 gubernatorial elections, it finds that citizens of states with greater income inequality are less likely to vote and that income inequality increases income bias in the electorate, lending empirical support to Schattschneider's argument.


Top Incomes in France: Booming Inequalities?

Camille Landais
Paris School of Economics Working Paper, June 2008

I study the evolution of top incomes in France, using income tax tabulations, and confronting them with data from a large sample of households with exhaustive sampling at the upper end of the income distribution, issued by the French tax administration. Results exhibit a strong increase in market income inequalities measured by top income shares since the late 1990s. The surge in top wages at the top 1% and top 0.1% of the wage distribution is predominantly responsible for the explosion of top income shares, and puts an end to 30 years of stability of the French wage hierarchy. I show that top income and top wage mobility is low, stable, and comparable to that in Canada (where income concentration is 2 times higher) and cannot be responsible for this surge in top income and top wage shares. Neither can the decline of top marginal income tax rates fully explain this evolution through effects on reported incomes. However, in a context of strengthened European tax competition and increased high-skilled labor mobility, my results suggest that France, along with other European countries may be on its way to bridging part of its "top income gap" with English-speaking countries.


The Politics of Inequality: Voter Mobilization and Left Parties in Advanced Industrial States

Jonas Pontusson & David Rueda
Comparative Political Studies, forthcoming

Why is it that some countries have witnessed significant increases in inequality since the 1960s while at the same time experiencing very little change in the way politics is conducted? And why is it that in other countries, where inequality has increased much less, the Left has become substantially more redistributive? The answer, the authors argue, has to do with the interaction between inequality and political mobilization of low-income voters. The authors make two points in this article. First, high levels of inequality move Left parties to the left. Second, although increasing inequality pushes the core constituencies of Left parties to the left, it also makes some individuals less likely to be involved in politics. The authors argue that Left parties will respond to an increase in inequality only when low-income voters are politically mobilized. They explore these claims through a comparative analysis of Left party programs in 10 Organisation for Economic Co-operation and Development countries over the period 1966 to 2002.


When Equality Trumps Reciprocity

Erte Xiao & Cristina Bicchieri
Journal of Economic Psychology, forthcoming

Inequity aversion and reciprocity have been identified as two primary motives underlying human decision-making. However, because income and wealth inequalities exist to some degree in all societies, these two key motives can point to different decisions. In particular, when a beneficiary is less wealthy than the benefactor, a reciprocal action can lead to greater inequality. In this paper we report data from a trust game variant where trustees' responses to kind intentions generate inequality in favor of investors. In relation to a standard trust game treatment where trustees' responses reduce inequality, the proportion of non-reciprocating decisions is twice as large when reciprocity promotes inequality. Moreover, we find that investors expect that this will be the case. Overall, we find that a majority (more than half) of trustees do not reciprocate when reciprocity increases inequality that favors investors. Our results call attention to the potential importance of inequality in principal-agent relationships and have important implications for policies aimed at promoting trust and cooperation.


It is Better to Be the Head of a Chicken than the Tail of a Phoenix: Concern for Relative Standing in Rural China

Fredrik Carlsson & Ping Qin
Journal of Socio-Economics, forthcoming

This paper examines the concern for relative standing among rural households in China. We used a survey-experimental method to measure to what extent poor Chinese farmers care about their relative income. We found compared to previous studies in developed countries, the concern for relative standing seems to be equally strong among rural households in China. This should be seen in the light of the rapid change China has undergone, with high growth, and increased inequality. Thus, the rural population, which is lagging behind, is suffering not only from the low absolute income but also from low relative income.


Does Equality Contribute to Prosocial Behavior?

Chang-Jiang Liu
Social Behavior and Personality, Winter 2009, Pages 1369-1371

It is hypothesized that people who obtain their initial resources in an equal way will behave prosocially since they endorse equality. Using a one-factor (Allocation system: equality, equity, need, vs. individualism) between-participants design, in this study participants were presented with a policy scenario. Results showed that an equality-based policy was rated most satisfactory, whereas the mean of contribution amount under the equality condition was less than that of the average contribution amount under the other three conditions. This finding implies that equality undermines people's prosocial behavior, a finding worthy of further examination.


Unequal Giving: Monetary Gifts to Children Across Countries and Over Time

Julie Zissimopoulos & James Smith
RAND Working Paper, December 2009

Money parents give their adult children may be important for the financing of a child's education or a first home, relaxing binding credit constraints or responding to a transitory income shock. Financial transfers however, may extend economic disparities across generations if the wealthy transfer considerable resources to their children while middle class and poor households do not. In this paper, the authors first examine annual gifts of money from parents to adult children in the United States and ten European countries using the 2004 waves of the Health and Retirement Study (HRS) and Survey of Health, Aging and Retirement in Europe (SHARE). Second, utilizing the long panel of the HRS, the authors study the long-run behavior of parental monetary giving to children across families and within a family. This paper found that in all countries, some parents gave money to children, many did not, the amount was low, about 500 Euros annually per child, and varied by parental socio-economic status and public social expenditures. In the short-term parents in the U.S. gave money to a child to compensate for low earnings or satisfy an immediate need such as schooling. Over sixteen years, parents gave an average of about $38,000 to all their children, five percent gave over $140,000 and gave persistently. With time, the amount of money children in the same family received became more equal and a child's level of education was one of the few remaining sources of differences in money given to children. Overall, the annual amount of money parents gave adult children in any country was not enough to affect the distribution of resources within or between families in the next generation although the timing of transfers for schooling or housing may have a significant impact on an individual child. Annual parental transfers for college age children in school in the U.S. were substantially higher than average transfers to all children. The effect of parental transfers for higher education on intergenerational mobility in the U.S. will depend in part upon whether this financing is essential in the schooling decision.


Inequality and Human Rights: Who Controls What, When, and How

Todd Landman & Marco Larizza
International Studies Quarterly, September 2009, Pages 715-736

This article tests the empirical relationship between inequality and the protection of personal integrity rights using a cross-national time-series data set for 162 countries for the years 1980-2004. The data comprise measures of land inequality, income inequality, and a combined factor score for personal integrity rights protection, while the analysis controls for additional sets of explanatory variables related to development, political regimes, ethnic composition, and domestic conflict. The analysis shows robust support for the empirical relationship between income inequality and personal integrity rights abuse across the whole sample of countries as well as for distinct subsets, including non-communist countries and non-OECD countries. The hypothesized effect of land inequality is also born out by the data, although its effects are less substantial and less robust across different methods of estimation. Additional variables with explanatory weight include the level of income, democracy, ethnic fragmentation, domestic conflict, and population size. Sensitivity analysis suggests that the results are not due to reverse causation, misspecification or omitted variable bias. The analysis is discussed in the context of inequality and rights abuse in specific country cases and the policy implications of the results are considered in the conclusion.


Justifying Inequality: A Cross-Temporal Investigation of U.S. Income Disparities and Just-World Beliefs from 1973 to 2006

Lori Malahy, Michelle Rubinlicht & Cheryl Kaiser
Social Justice Research, December 2009, Pages 369-383

This cross-temporal meta-analysis examined 6,120 American college students' scores on the Belief in a Just World Scale (BJW; Rubin and Peplau, J Soc Issues 31(3):65-90, 1975) across the last three and a half decades. Drawing on models of belief threat, we examined whether the causal relationship between perceived injustice and increases in BJW could extend from the laboratory to society by using macro-economic injustice trends to predict changes in BJW across these decades. Specifically, we hypothesized that perceptions of inequality, operationalized as rising income disparities, would result in a greater need to justify this inequality and that this would be evidenced by increased commitment to just world beliefs over time. Consistent with this prediction, BJW scores increased significantly over time and this increase was positively related to increasing income disparities in society. Income inequality remained a significant predictor of BJW scores even after controlling for additional factors of general income and political ideology. Implications of increasing just world beliefs are discussed in terms of psychological and policy outcomes.


A 'Leaky Bucket' in the Real World: Estimating Inequality Aversion using Survey Data

Jukka Pirttila & Roope Uusitalo
Economica, January 2010, Pages 60-76

Existing evidence of inequality aversion relies on data from class-room experiments where subjects face hypothetical questions. This paper estimates the magnitude of inequality aversion using representative survey data, with questions related to the real-economy situations the respondents face. The results reveal that inequality aversion can be measured in a meaningful way using survey data, but the magnitudes of the estimates depend dramatically on how inequality aversion is measured. No matter how measured, the revealed inequality aversion predicts opinions on a wide range of questions related to the welfare state, such as the level of taxation, tax progressivity and the structure of unemployment benefits.


Intergenerational Wealth Transmission among Agriculturalists: Foundations of Agrarian Inequality

Mary Shenk, Monique Borgerhoff Mulder, Jan Beise, Gregory Clark, William Irons, Donna Leonetti, Bobbi Low, Samuel Bowles, Tom Hertz, Adrian Bell & Patrizio Piraino
Current Anthropology, February 2010, Pages 65-83

This paper uses data from eight past and present societies practicing intensive agriculture to measure the transmission of wealth across generations in preindustrial agricultural societies. Focusing on embodied, material, and relational forms of wealth, we compare levels of wealth between parents and children to estimate how effectively wealth is transmitted from one generation to the next and how inequality in one generation impacts inequality in the next generation. We find that material wealth is by far the most important, unequally distributed, and highly transmitted form of wealth in these societies, while embodied and relational forms of wealth show much weaker importance and transmission. We conclude that the unique characteristics of material wealth, and especially wealth in land, are key to the high and persistent levels of inequality seen in societies practicing intensive agriculture. We explore the implications of our findings for the evolution of inequality in the course of human history and suggest that it is the intensification of agriculture and the accompanying transformation of land into a form of heritable wealth that may allow for the social complexity long associated with agricultural societies.


Inequality and Democracy: Why Inequality Harms Consolidation but Does Not Affect Democratization

Christian Houle
World Politics, October 2009, Pages 589-622

Under what conditions do democracies emerge and consolidate? Recent theories suggest that inequality is among the leading determinants of both democratization and consolidation. By contrast, this article argues that inequality harms consolidation but has no net effect on democratization. The author shows that the existing theories that link inequality to democratization suffer from serious limitations: (1) they are useful only for understanding transitions from below and thus do not apply to many other transitions (that is, those from above); (2) even for democratization from below, their predictions are unlikely to hold, since inequality actually has two opposite effects; and (3) they ignore collective action problems, which reduces their explanatory power. However, these objections do not affect the relationship between inequality and consolidation. In particular, while inequality has two opposite effects on the probability of transition to democracy, it unambiguously increases the probability of transition away from democracy. This article conducts the most comprehensive empirical test to date of the relationship between inequality and democracy. It finds no support for the main democratization theories. Contrary to what they predict, estimation suggests neither a monotonic negative nor an inverted U-shaped relationship. Yet inequality increases the probability of backsliding from democracy to dictatorship.

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