Findings

Wants and Needs

Kevin Lewis

July 08, 2025

Avoidance Responses to the Wealth Tax
Mariona Mas-Montserrat, José María Durán-Cabré & Alejandro Esteller-Moré
Journal of Public Economics, June 2025

Abstract:
As a consequence of the Great Recession, the Spanish government reintroduced the Wealth Tax in 2011. We exploit the variation in wealth tax exposure to analyse taxpayers’ responses to this reintroduction. While facing higher wealth taxes did not discourage savings, results indicate that a 0.1 percentage point increase in the average tax rate leads to a reduction in taxable wealth of 3.21% over 4 years. In particular, the reduction in taxable wealth comes from taking advantage of exemptions, mostly business-related. Thus, the reintroduction induced avoidance. Taxpayers also take advantage of the limit on tax liability through a change in their asset and income composition. By far, this latter source of avoidance accounts for the greatest impact on tax revenues (92.6%). The impact of these avoidance strategies on revenue collected was far from negligible, since according to our estimates they represent a 2012-2015 revenue loss of 2.75 times the 2011 estimated wealth tax revenues. These findings should be useful to policymakers and administrations considering the implementation of a wealth tax, as they illustrate the pitfalls to be circumvented.


Taxing the Rich: How Incentives and Embeddedness Shape Millionaire Tax Flight
Cristobal Young & Ithai Lurie
American Journal of Sociology, forthcoming

Abstract:
Taxing the rich is a central debate in an era of high inequality. Elite taxation can reduce income disparities and fund public investments, yet it also incentivizes top earners to relocate -- potentially eroding the tax base and undermining redistribution. We argue that tax migration occurs at the intersection of incentives and embeddedness: While tax incentives encourage relocation, place-specific social capital anchors individuals to their communities, discounting those incentives. Drawing on 3.9 million observations of top earners over seven years, we study two natural experiments using IRS administrative data. First, the 2017 federal tax overhaul reshaped tax incentives in favor of lower-tax states, sparking widespread predictions of tax flight. Second, the COVID-19 pandemic weakened embeddedness, disrupting social and professional ties that root top earners in place. By studying these shocks, we find that tax incentives influence migration at the margin, but embeddedness plays a central role in shaping top taxpayers’ mobility.


Immigration and Inequality in the Next Generation
Mark Borgschulte et al.
NBER Working Paper, June 2025

Abstract:
We estimate the causal impacts of immigration to U.S. cities on the intergenerational economic mobility of children of U.S.-born parents. Immigration raises the educational attainment and earnings among individuals who grew up in poorer households and reduces the earnings, educational attainment, and employment among those who grew up in more affluent households. On net, immigration diminishes the link between parents' and their children's economic outcomes in the receiving population, and thus increases intergenerational mobility. The increase in mobility is strikingly similar in models estimated across cities and in within-city models that control for the trajectories of immigrant destinations.


Income inequality depresses support for higher minimum wages
Daniela Goya-Tocchetto et al.
Journal of Experimental Psychology: General, forthcoming

Abstract:
The minimum wage can be an effective policy tool for mitigating economic inequality, but public demand for higher minimum wages has not kept up with rising levels of income disparities. In our first study using protest attendance data over a six-and-a-half-year period in the United States (N = 130,562), we find evidence that higher economic inequality was associated with fewer and less well-attended protests targeted at changing economic conditions and raising minimum wages. We corroborate this finding across eight laboratory experiments (N = 7,286) -- including a U.S. nationally representative sample -- finding causal evidence that higher levels of income inequality decrease support for higher minimum wages. We propose that this decreased support results from a psychological tendency to engage in “is-to-ought” reasoning, where individuals use information about how much people actually earn to determine how much they should earn. We conclude by introducing an intervention to mitigate the effects of this phenomenon and discuss implications for policy communication.


How Does Wage Inequality Affect the Labor Movement?
Barbara Biasi et al.
NBER Working Paper, June 2025

Abstract:
This paper provides the first causal evidence on how occupational wage inequality affects the labor movement, using three complementary research designs: a vignette experiment with union organizers, an information intervention during the 2023 Writers Guild of America strike, and a natural experiment following a Wisconsin reform that increased wage inequality among public school teachers. Across all studies, we find that occupational inequality undermines union strength, through multiple channels. First, workers with high individual bargaining power are more likely to withdraw support in unequal environments, preferring individual over collective bargaining. Second, union organizers strategically respond to inequality in ways that may preserve membership but limit redistribution. For instance, they shift away from campaigning on wages and choose smaller, more homogeneous bargaining units. Taken together, our findings highlight the potential for “inequality traps”, where rising inequality erodes the very institutions designed to counteract it.


Park Avenues: Wealth, Neighborhoods, and Mobility in Gilded Age Manhattan
Michael Giordano
Northwestern University Working Paper, May 2025

Abstract:
I study the long-run effects of major urban improvements on existing households. I exploit family location near the site of New York's Central Park (1858-76) prior to an east-west divergence in land values, neighbor wealth, and amenities. Between 1860-70, east side property holders gained 70% more wealth than their west-side counterparts, while non-holders remained similar. Regardless of property, son mobility by 1900 and grandson mobility by 1940 are unchanged. Gains for propertied households were partially offset by reduced labor force participation. Limited social integration with wealthy newcomers may explain why improved neighborhood conditions failed to increase mobility for existing households.


Income and Wealth Inequality in the United States: An Update Including the 2022 Wave
Moritz Kuhn & José-Víctor Ríos-Rull
NBER Working Paper, May 2025

Abstract:
We provide a comprehensive overview of earnings, income and wealth inequality based on the 2022 Survey of Consumer Finances from the United States. We document the current state of inequality and its evolution over the last three decades organizing the data along key demographic dimensions including age, education, and marital status. The 2022 data reveal that wealth remains highly concentrated, with the top 1% holding 35% of total wealth down from a peak of 39% in 2016. This recent decline in wealth concentration -- occurring despite rising income inequality -- reflects strong housing price appreciation that disproportionately benefited middle-class households. We extend previous analyses with new perspectives on inequality, including: (1) the role of labor market segmentation in generating wealth disparities beyond standard employment categories; (2) differences in wealth accumulation across birth cohorts showing that younger generations accumulate less wealth than their predecessors at comparable ages; (3) disparities associated with family structure, particularly the financial vulnerability of single-parent households; and (4) heterogeneity in self-reported savings motives, with precautionary savings dominating for lower-wealth households while retirement planning and bequests become more prominent at the top of the distribution. These findings enhance our understanding of the multifaceted nature of inequality and offer essential inputs for structural models and policy design.


Downward Mobility and Far-Right Party Support: Broad Evidence
Alan Jacobs & Mark Kayser
Comparative Political Studies, forthcoming

Abstract:
Much debate has centered on the relative effects of economic and cultural factors on support for far-right parties. Recent work, however, has proposed a synthesis focused on the role of social status, a concept capturing a combination of economic position and social esteem. While previous studies have adduced suggestive evidence that status loss shapes far-right support, this paper presents the broadest empirical assessment of the proposition to date. Focusing on long-term status change, operationalized as intergenerational occupational mobility, we find a strong relationship between mobility and support for the far right across 11 European countries. Moreover, adopting a modeling approach that addresses confounding between status levels and status change, we demonstrate an asymmetry: while downward mobility predicts increased far-right voting, upward mobility has little effect. The findings suggest that long-run economic forces that have depressed the occupational prospects of native-born workers contribute to the far right’s rise.


Not Playing Favorites: Parents and the Value of Equal Opportunity
James Berry, Rebecca Dizon-Ross & Maulik Jagnani
American Economic Journal: Applied Economics, July 2025, Pages 117-160

Abstract:
We conduct two experiments to identify the value parents place on equality of opportunity when investing in children. The experiments exogenously vary short-run returns to educational investments to identify the weight placed on equalizing "opportunity" (child-level investment) relative to maximizing "returns" (total household earnings) or to equalizing "outcomes" (child-level expected earnings). While parents in both experiments place some weight on maximizing returns, they also display a strong preference for equalizing opportunities and are willing to forgo 15-45 percent of their earnings to do so. Parents in higher-income countries also care about equalizing outcomes, while parents in lower-income countries do not.


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