Not Enough
Out of Control: The Interplay of Subjective Poverty and Income on Spending
Joe Gladstone & Silvia Bellezza
Journal of Marketing Research, forthcoming
Abstract:
Consumers' spending decisions are shaped not only by their objective financial resources but also by their subjective perceptions of wealth. This research investigates the interplay between subjective poverty (e.g., feeling financially constrained) and income in driving spending. Across five studies including real-world spending data from a U.K. financial management app, longitudinal surveys from Kenya and the United States, and controlled experiments, the authors reveal that subjective poverty increases spending among higher-income consumers but decreases spending among lower-income consumers. That is, wealthy consumers who feel financially poor tend to spend more, whereas poorer consumers who feel financially constrained tend to reduce their spending. Drawing on compensatory control theory, the authors demonstrate that subjective poverty threatens individuals' sense of personal control over life, but people cope with this diminished sense of control differently based on their available resources. Higher-income individuals engage in compensatory consumption to restore control, while lower-income individuals adopt different strategies, including reduced spending. This research advances the understanding of how psychological and material dimensions of wealth interact to shape consumer behavior.
No meta-analytical effect of economic inequality on well-being or mental health
Nicolas Sommet et al.
Nature, forthcoming
Abstract:
Exposure to economic inequality is widely thought to erode subjective well-being and mental health, which carries important societal implications. However, existing studies face reproducibility issues, and theory suggests that inequality only affects individuals in disadvantaged contexts. Here we present a meta-analysis of 168 studies using multilevel data (11,389,871 participants from 38,335 geographical units) identified across 10 bibliographical databases (2000–2022). Contrary to popular narratives, random-effects models showed that individuals in more unequal areas do not report lower subjective well-being (standardized odds ratio (OR+0.05) = 0.979, 95% confidence interval = 0.951–1.008). Moreover, although inequality initially seemed to undermine mental health, the publication-bias-corrected association was null (OR+0.05 = 1.019; 0.990–1.049). Meta-analytical effects were smaller than the smallest effect of interest, and specification curve analyses confirmed these results across ≈95% of 768 alternative models. When assessing study quality and certainty of evidence using ROBINS-E and GRADE criteria, ROBINS-E rated 80% of studies at high risk of bias, and GRADE assigned greater certainty to the null effects than to the negative effects. Meta-regressions revealed that the adverse association between inequality and mental health was confined to low-income samples. Moreover, machine-learning analyses indicated that the association with well-being was negative in high-inflation contexts but positive in low-inflation contexts. These moderation effects were replicated using Gallup World Poll data (up to 2 million participants). These findings challenge the view that economic inequality universally harms psychological health and can inform public health policy.
"Giving Up": The Impact of Decreasing Housing Affordability on Consumption, Work Effort, and Investment
Seung Hyeong Lee & Younggeun Yoo
University of Chicago Working Paper, November 2025
Abstract:
Housing affordability has declined sharply in recent decades, leading many younger generations to give up on homeownership. Using a calibrated life-cycle model matched to U.S. data, we project that the cohort born in the 1990s will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents' generation. The model also shows that as households' perceived probability of attaining homeownership falls, they systematically shift their behavior: they consume more relative to their wealth, reduce work effort, and take on riskier investments. We show empirically that renters with relatively low wealth exhibit the same patterns. These responses compound over the life cycle, producing substantially greater wealth dispersion between those who retain hope of homeownership and those who give up. We propose a targeted subsidy that lifts the largest number of young renters above the "giving-up threshold." This policy yields welfare gains that are 3.2 times those of a uniform transfer and 10.3 times those of a transfer targeted to the bottom 10% of the wealth distribution, while also increasing homeownership rate, raising work effort, and reducing reliance on the social safety net.
Judging Trends in Income Inequality in the U.S.: Do the Measures Matter?
Kerry Smith
Southern Economic Journal, forthcoming
Abstract:
This paper uses Piketty, Saez, and Zucman's income measures that are constructed to be consistent with distributional national accounts from 1966 to 2019. Three inequality indexes and two strategies for estimating them were evaluated using the pre-tax and post-tax income measures. The indexes were: the Gini coefficient, mean logarithmic deviation, and the Theil index. The results imply that the conclusion on trends in income inequality depends on the measure used. Using the index recommended as reflecting changes in the full distribution of income, the mean logarithmic deviation, both model-based estimates and distribution-free estimates suggest income inequality at the end of the PSZ sample (2019) was about the same as it was in 1966.
Parental Education and the Responses to Higher SAT Scores
Georg Graetz, Björn Öckert & Oskar Nordström Skans
Journal of Human Resources, November 2025, Pages 1971-2007
Abstract:
Using discontinuities within the Swedish SAT system, we study the causal impact of additional admission opportunities on participation in higher education among high-ability students. Students with low-educated parents who marginally pass an SAT score threshold, are more likely to enroll and graduate from programs they could have attended even with a lower score. This suggests that they face behavioral barriers even in a setting where colleges are tuition-free, student grants are universal, and application systems are simple. In contrast, students with high-educated parents respond to enhanced opportunities in ways that appear rational and informed, particularly by switching to higher-quality, more competitive programs.
Education Signaling and Employer Learning Heterogeneity
Yuhan Chen, Thomas Jungbauer & Michael Waldman
Cornell Working Paper, November 2025
Abstract:
We investigate the implications of heterogeneous employer learning on education signaling and workers sorting across industries. In the equilibrium of our model, higher-ability workers join industries with faster employer learning speeds, resulting in a matching distortion of workers and industries. In addition, our results are robust to varying degrees of asymmetric employer learning, and establish that industry choice itself serves as a signal of worker ability. Finally, our theoretical approach suggests a novel perspective on a heretofore neglected labor market puzzle, i.e., why few of the richest individuals have obtained higher degrees of education.
Pricing for opportunity: The impact of spatially varying rent subsidies on housing voucher neighborhoods and take-up
Ingrid Gould Ellen, Katherine O’Regan & Sarah Strochak
Journal of Public Economics, October 2025
Abstract:
The Housing Choice Voucher program serves over 2.3 million households per year. While the program provides significant benefits, most voucher holders live in high-poverty neighborhoods, and many recipients fail to use their vouchers at all. This paper evaluates a new programmatic approach for expanding and improving neighborhood outcomes, which pegs voucher subsidy amounts to ZIP Code-level rents, rather than being uniform across an entire metro area. We find that this pricing change increases moves to higher rent, lower poverty ZIP Codes without increasing overall financial costs or affecting the ability of new voucher recipients to use their vouchers to lease homes. This even holds true for the recipients most at risk of experiencing a decline in their ability to use vouchers because the stock of voucher-eligible units near them likely decreases. We show that subgroups of households and landlords make adjustments on other margins, however. Specifically, those leasing in low-rent neighborhoods rent smaller homes and spend more of their income on rent, while landlords in these neighborhoods charge lower rents to match rent subsidies.