One over the other
Does economic inequality breed political inequality?
Christian Houle
Democratization, forthcoming
Abstract:
Does economic inequality generate political inequality? While there is a large literature on the effect of inequality on regime change and support for democracy, there is little research on its effect on political equality across socioeconomic positions. Yet democracy and political equality, although related, are distinct concepts. While political power tends to be more evenly distributed in democracies than in autocracies, there is substantial variation in both regime types. This study argues that economic inequality should decrease political equality through multiple mechanisms: (1) it increases the resources of the rich relative to the poor; (2) it widens the gap in policy preferences across income groups; (3) it reduces participation; and (4) it depresses support for democracy. Using three measures of inequality and data on more than 140 countries between 1961 and 2008, it was found that economic inequality tends to increase political inequality, even when one controls for the level of democracy. Results hold when the sample is restricted by regime type. Finally, evidence in favour of the mechanisms is provided.
Slower Productivity and Higher Inequality: Are They Related?
Jason Furman & Peter Orszag
Peterson Institute for International Economics Working Paper, June 2018
Abstract:
Income growth for typical American families has slowed dramatically since 1973. Slower productivity growth and an increase in income inequality have both contributed to this trend. This paper addresses whether there is a relationship between the productivity slowdown and the increase in inequality, specifically exploring the extent to which reduced competition and dynamism can explain both of these phenomena. Productivity growth has been uneven across the economy, with top firms earning increasingly skewed returns. At the same time, the between-firm disparities have been important in explaining the increase in labor income inequality. Both these findings are consistent with the observed reductions in competition, as evidenced by increasing concentration and economic rents, and business dynamism. The authors also explore the scenarios under which government policies can help mitigate, or contribute to, declining competition and dynamism.
Genetic analysis of social-class mobility in five longitudinal studies
Daniel Belsky et al.
Proceedings of the National Academy of Sciences, forthcoming
Abstract:
A summary genetic measure, called a "polygenic score," derived from a genome-wide association study (GWAS) of education can modestly predict a person's educational and economic success. This prediction could signal a biological mechanism: Education-linked genetics could encode characteristics that help people get ahead in life. Alternatively, prediction could reflect social history: People from well-off families might stay well-off for social reasons, and these families might also look alike genetically. A key test to distinguish biological mechanism from social history is if people with higher education polygenic scores tend to climb the social ladder beyond their parents' position. Upward mobility would indicate education-linked genetics encodes characteristics that foster success. We tested if education-linked polygenic scores predicted social mobility in >20,000 individuals in five longitudinal studies in the United States, Britain, and New Zealand. Participants with higher polygenic scores achieved more education and career success and accumulated more wealth. However, they also tended to come from better-off families. In the key test, participants with higher polygenic scores tended to be upwardly mobile compared with their parents. Moreover, in sibling-difference analysis, the sibling with the higher polygenic score was more upwardly mobile. Thus, education GWAS discoveries are not mere correlates of privilege; they influence social mobility within a life. Additional analyses revealed that a mother's polygenic score predicted her child's attainment over and above the child's own polygenic score, suggesting parents' genetics can also affect their children's attainment through environmental pathways. Education GWAS discoveries affect socioeconomic attainment through influence on individuals' family-of-origin environments and their social mobility.
Redistributing the Gains From Trade Through Progressive Taxation
Spencer Lyon & Michael Waugh
NBER Working Paper, June 2018
Abstract:
Should a nation's tax system become more progressive as it opens to trade? Does opening to trade change the benefits of a progressive tax system? We answer these question within a standard incomplete markets model with frictional labor markets and Ricardian trade. Consistent with empirical evidence, adverse shocks to comparative advantage lead to labor income losses for import-competition-exposed workers; with incomplete markets, these workers are imperfectly insured and experience welfare losses. A progressive tax system is valuable, as it substitutes for imperfect insurance and redistributes the gains from trade. However, it also reduces the incentives for labor to reallocate away from comparatively disadvantaged locations. We find that optimal progressivity should increase with openness to trade with a ten percentage point increase in openness necessitating a five percentage point increase in marginal tax rates for those at the top of the income distribution.
Income inequality and health outcomes in the United States: An empirical analysis
Pravin Matthew & Donka Mirtcheva Brodersen
Social Science Journal, forthcoming
Abstract:
A growing body of research suggests a relationship between health and income inequality. This study specifically analyzes the correlation between income inequality, measured by state-level Gini coefficients from the American Community Survey (ACS), and individual behavioral, physical, and mental health outcomes from the Behavioral Risk Factor Surveillance System (BRFSS) for 2006 through 2014. After controlling for demographic and socioeconomic characteristics, health insurance status, year trends, and state fixed effects, income inequality was found to have significant relationships with behavioral, physical, and mental health outcomes, including heavy drinking, obesity, exercise, diabetes, heart attack, heart disease, physical and mental health problems, and depression, and often the impact on low-income individuals is slightly smaller than on the high-income group. The research suggests that economic policies to address the rising income inequality in the United States might serve to also address some of our nation's most troubling health statistics.
Children and the Elderly: Wealth Inequality Among America's Dependents
Christina Gibson-Davis & Christine Percheski
Demography, June 2018, Pages 1009-1032
Abstract:
Life cycle theory predicts that elderly households have higher levels of wealth than households with children, but these wealth gaps are likely dynamic, responding to changes in labor market conditions, patterns of debt accumulation, and the overall economic context. Using Survey of Consumer Finances data from 1989 through 2013, we compare wealth levels between and within the two groups that make up America's dependents: the elderly and child households (households with a resident child aged 18 or younger). Over the observed period, the absolute wealth gap between elderly and child households in the United States increased substantially, and diverging trends in wealth accumulation exacerbated preexisting between-group disparities. Widening gaps were particularly pronounced among the least-wealthy elderly and child households. Differential demographic change in marital status and racial composition by subgroup do not explain the widening gap. We also find increasing wealth inequality within child households and the rise of a "parental 1 %." During a time of overall economic growth, the elderly have been able to maintain or increase their wealth, whereas many of the least-wealthy child households saw precipitous declines. Our findings suggest that many child households may lack sufficient assets to promote the successful flourishing of the next generation.
Transparency, Class Bias, and Redistribution: Evidence from the American States
Alexander Severson
State Politics & Policy Quarterly, forthcoming
Abstract:
This study employs state-level panel data between 1978 and 2000 to explore the relationship between transparency, media market penetration, class bias in voter participation, and welfare effort in the United States. I present empirical evidence that the effect of transparency - operationalized as state fiscal transparency - on state welfare effort is conditional on class bias in voter participation. Specifically, I present evidence that in states where transparency and class bias increased over time, state welfare effort significantly declined. These results are robust to the inclusion of controls for other determinants of redistribution that traditionally vary with geography such as governor partisanship, legislator ideology, citizen ideology, gross state product (GSP), and state demographic characteristics, and are robust across several alternate model specifications. My findings suggest that increased transparency does not automatically improve the condition of socioeconomically-disadvantaged citizens and that transparency may have welfare-reducing effects in societies with increasing participatory gulfs between the most and least advantaged citizens.
Economic Inequality and Legislative Agendas in Europe
Derek Epp & Enrico Borghetto
University of Texas Working Paper, February 2018
Abstract:
This article investigates the effects of economic inequality on legislative agendas. It considers two competing hypotheses: (1) that policymakers will act to counter rising inequality by renewing their focus on redistributive social policies, and (2) that rising inequality makes legislative agendas especially vulnerable to the influence of economic elites, and that these elites will attempt to keep redistributive social policies off the agenda. Empirical tests, which are designed to arbitrate between these hypotheses, use data on public laws and parliamentary bills introduced in the legislatures of nine European countries between 1941 and 2014. The evidence is supportive of the second hypothesis: as inequality becomes more acute, European legislative agendas become systematically less diverse and this narrowing of attention is driven by a migration away from social safety-net issues toward issues relating to law enforcement, immigration, and national defense.
Hot streaks in artistic, cultural, and scientific careers
Lu Liu et al.
Nature, July 2018, Pages 396-399
Abstract:
The hot streak - loosely defined as 'winning begets more winnings' - highlights a specific period during which an individual's performance is substantially better than his or her typical performance. Although hot streaks have been widely debated in sports, gambling and financial markets over the past several decades, little is known about whether they apply to individual careers. Here, building on rich literature on the lifecycle of creativity, we collected large-scale career histories of individual artists, film directors and scientists, tracing the artworks, films and scientific publications they produced. We find that, across all three domains, hit works within a career show a high degree of temporal regularity, with each career being characterized by bursts of high-impact works occurring in sequence. We demonstrate that these observations can be explained by a simple hot-streak model, allowing us to probe quantitatively the hot streak phenomenon governing individual careers. We find this phenomemon to be remarkably universal across diverse domains: hot streaks are ubiquitous yet usually unique across different careers. The hot streak emerges randomly within an individual's sequence of works, is temporally localized, and is not associated with any detectable change in productivity. We show that, because works produced during hot streaks garner substantially more impact, the uncovered hot streaks fundamentally drive the collective impact of an individual, and ignoring this leads us to systematically overestimate or underestimate the future impact of a career. These results not only deepen our quantitative understanding of patterns that govern individual ingenuity and success, but also may have implications for identifying and nurturing individuals whose work will have lasting impact.
Trade Union Decline, Deindustrialization, and Rising Income Inequality in the United States, 1947 to 2015
Christopher Kollmeyer
Research in Social Stratification and Mobility, forthcoming
Abstract:
The steady rise of income inequality in the United States coincides with trade union decline and structural changes to the economy, but prior studies do not consider whether these phenomena interact in ways that magnify inequality. Drawing on institutional and market accounts of inequality, the author develops the argument that trade union decline, occurring within the context of deindustrialization and the offshoring of routine-manufacturing jobs, creates more profound distributional effects than these factors would create in isolation. This argument is tested (net of other important determinants of income inequality) using time-series regression models and national-level data from 1947 to 2015. Results support the proposed interaction effects, suggesting that a thorough understanding of inequality and social stratification must consider not only institutions and markets, but how they interact. The results also suggest that inequality is driven by financialization, public sector retrenchment, and unemployment, but not necessarily by technological change.
Burden Sharing: Income, Inequality and Willingness to Fight
Christopher Anderson, Anna Getmansky & Sivan Hirsch-Hoefler
British Journal of Political Science, forthcoming
Abstract:
What explains citizens' willingness to fight for their country in times of war? Using six waves of the World Values Survey, this study finds that individual willingness to fight is negatively related with country-level income inequality. When income inequality is high, the rich are less willing to fight than the poor. When inequality is low, the poor and rich differ little in their willingness to fight. This change in the willingness to fight between low and high inequality countries is greater among the rich than among the poor. This article explores several explanations for these findings. The data are consistent with the argument that high inequality makes it more attractive for the rich to buy themselves out of military service.
The Intergenerational Transmission of Human Capital: Evidence from the Golden Age of Upward Mobility
David Card, Ciprian Domnisoru & Lowell Taylor
University of California Working Paper, June 2018
Abstract:
We use 1940 Census data to study the intergenerational transmission of human capital for children born in the 1920s and educated during an era of expanding but unequally distributed public school resources. Looking at the gains in educational attainment between parents and children, we document lower average mobility rates for blacks than whites, but wide variation across states and counties for both races. We show that schooling choices of white children were highly responsive to the quality of local schools, with bigger effects for the children of less-educated parents. We then narrow our focus to black families in the South, where state-wide minimum teacher salary laws created sharp differences in teacher wages between adjacent counties. These differences had large impacts on schooling attainment, suggesting an important causal role for school quality in mediating upward mobility.
Top Donors and the Rising Concentration of Giving in the United States, 1960-2012
Nicolas Duquette
University of Southern California Working Paper, June 2018
Abstract:
This paper computes the share of all household giving accounted for by the American households donating the largest amounts over the 1960-2012 period. The share of donations accounted for by a minority of top donors has risen sharply over this period. This rising concentration is driven by both larger gifts at the top and reduced giving by the broad majority of households. Charities are increasingly dependent on major donors, and the share of donations flowing to the charities receiving the highest levels of donation revenue has risen. The 2017 Tax Cut and Jobs Act preserved or increased donation incentives for many top donors, and is likely to decrease aggregate charitable giving by less than is widely feared, while accelerating the concentration of giving among those who give the most.
Relative Deprivation, Absolute Deprivation, and Homicide: Testing an Interaction Between Income Inequality and Disadvantage
Bert Burraston et al.
Homicide Studies, forthcoming
Abstract:
Both relative and absolute deprivation have effects on crime. These two concepts may be complementary, but much scholarship has treated them as separate. The present study assesses whether the effects of relative and absolute deprivation, measured as income inequality and disadvantage, respectively, interact in their effect on known homicide counts in U.S. counties. A multilevel regression model shows that there is a significant interaction between income inequality and disadvantage predicting homicide counts known to police. The plot of this interaction shows that when disadvantage is extremely high, increasing income inequality does not increase known homicides. The less disadvantage there is, the greater the effect of increasing income inequality on homicide counts in U.S. counties. This finding suggests that the effect of relative deprivation on known homicide is contingent on levels of absolute deprivation and vice versa. The implication of this finding is discussed.
Redistribution and the Individualism-Collectivism Dimension of Culture
Carola Conces Binder
Social Indicators Research, forthcoming
Abstract:
This paper examines the relationship between culture and redistribution, focusing on the individualism-collectivism dimension of culture. Perhaps surprisingly, countries with more individualistic cultures have significantly greater income redistribution and lower after-tax income inequality. This finding also holds when using instruments for individualism suggested by the literature on cross-cultural psychology, including historical pathogen prevalence and linguistic and genetic characteristics. The association between individualism and redistribution is driven by higher-income countries, which appear to be influenced by a distinct strain of individualism. Data from the World Values Survey reveals that in higher income countries, individualism is positively correlated with generalized trust and tolerance of outsiders and negatively correlated with belief in traditional gender roles. In lower income countries, individualism is associated with a stronger emphasis on self-reliance and the benefits of competition.