A culture of despair? Inequality and expectations of educational success
Jason DeBacker & Wesley Routon
Contemporary Economic Policy, forthcoming
A culture of despair represents a negative feedback loop, where perceptions of high economic inequality result in declines in expectations of future success and, in turn, lower probabilities of favorable outcomes. We focus on the first link in that proposed causal chain, the relationship between economic inequality and expectations. Using a panel of youths and geographic variation in inequality, we find a link between inequality and expectations regarding educational outcomes. Our findings show that youth of low socioeconomic status (SES) are negatively affected by inequality. In short, we find support for the theory of a culture of despair.
Economic Self-Interest and Americans’ Redistributive, Class, and Racial Attitudes: The Case of Economic Insecurity
Political Behavior, forthcoming
An influential body of research on American public opinion since the mid-1980s has found economic self-interest to be, at best, inconsistently and weakly related to social and political attitude formation. This article argues that this conclusion is related to a dearth of analysis of the potential effect of economic insecurity on American public opinion. It is argued that respondents’ perceptions of their own economic insecurity capture the extent to which not acting self-interestedly can result in hardship-causing economic loss. Empirically, it is shown -- through standard regression techniques and more stringent coarsened exact matching (CEM) -- that economic insecurity has a systematic and strong effect on the redistributive, class, and racial attitudes of Americans; an effect that often rivals or supersedes the effect of sociotropic and symbolic attitudes. It is also shown that affective economic insecurity -- one’s worry or anxiety regarding the potential of future economic hardship -- and cognitive economic insecurity -- an individual’s more or less dispassionate estimate of future economic hardship -- often have distinct and complementary effects in determining public opinion, even when both measures are included in the same model. The evidence presented here makes it clear that existing measures and conceptualizations of economic self-interest -- and the body of empirical work that discounts economic factors in American public opinion -- need to be rethought in light of economic insecurity.
Lessons from Denmark about Inequality and Social Mobility
James Heckman & Rasmus Landersø
NBER Working Paper, March 2021
Many American policy analysts point to Denmark as a model welfare state with low levels of income inequality and high levels of income mobility across generations. It has in place many social policies now advocated for adoption in the U.S. Despite generous Danish social policies, family influence on important child outcomes in Denmark is about as strong as it is in the United States. More advantaged families are better able to access, utilize, and influence universally available programs. Purposive sorting by levels of family advantage create neighborhood effects. Powerful forces not easily mitigated by Danish-style welfare state programs operate in both countries.
Tax Evasion at the Top of the Income Distribution: Theory and Evidence
John Guyton et al.
IRS Working Paper, March 2021
This paper studies tax evasion at the top of the U.S. income distribution using IRS micro-data from (i) random audits, (ii) targeted enforcement activities, and (iii) operational audits. Drawing on this unique combination of data, we demonstrate empirically that random audits underestimate tax evasion at the top of the income distribution. Specifically, random audits do not capture most tax evasion through offshore accounts and pass-through businesses, both of which are quantitatively important at the top. We provide a theoretical explanation for this phenomenon, and we construct new estimates of the size and distribution of tax noncompliance in the United States. In our model, individuals can adopt a technology that would better conceal evasion at some fixed cost. Risk preferences and relatively high audit rates at the top drive the adoption of such sophisticated evasion technologies by high-income individuals. Consequently, random audits, which do not detect most sophisticated evasion, underestimate top tax evasion. After correcting for this bias, we find that unreported income as a fraction of true income rises from 7% in the bottom 50% to more than 20% in the top 1%, of which 6 percentage points correspond to undetected sophisticated evasion. Accounting for tax evasion increases the top 1% fiscal income share significantly.
Recent Trends in US Income Distributions in Tax Record Data Using More Comprehensive Measures of Income including Real Accrued Capital Gains
Jeff Larrimore et al.
Journal of Political Economy, forthcoming
Use of Internal Revenue Service (IRS) tax records improves researchers’ ability to track income trends, although the focus on taxable market income in this research excludes important income sources. Using IRS data in combination with other data sources, we explore the effect of measuring inequality levels and trends with income, including real accrued capital gains based on Haig-Simons principles. While median market income fell 10% from 1989 to 2016, median economic income increased by 26% using our Haig-Simons-based measure. Top 1% income shares were lower and increased by only about one-third of that estimated using previous approaches over this period.
A Changing Landscape of Health Opportunity in the United States: Increases in the Strength of Association Between Childhood Socioeconomic Disadvantage and Adult Health Between the 1990s and the 2010s
Thomas Fuller-Rowell et al.
American Journal of Epidemiology, forthcoming
Understanding the changing health consequences of childhood socioeconomic disadvantage (SED) is highly relevant to policy debates on inequality and national and state goals to improve population health. However, changes in the strength of association between childhood SED and adult health over historic time are largely unexamined in the United States. The current study begins to address this knowledge gap. Data were from two national samples of adults collected in 1995 (n = 7,108) and 2012 (n = 3,577) as part of the Midlife in the United States study. Three measures of childhood SED (parent occupational prestige, childhood poverty exposure, and parent education) were combined into an aggregate index and examined separately. The association between childhood SED (aggregate index) and five health outcomes (BMI, waist circumference, chronic conditions, functional limitations, and self-rated health) was stronger in the 2012 sample than the 1995 sample, with the magnitude of associations being approximately twice as large in the more recent sample. Results persisted after adjusting for age, sex, race, marital status, and number of children, and were similar across all three measures of childhood SED. The findings suggest that the socioeconomic circumstances of childhood may have become a stronger predictor of adult health in recent decades.
Egalitarianism and the democratic deconsolidation: Is democracy compatible with socialism?
François Facchini & Mickael Melki
Public Choice, March 2021, Pages 447–465
The unprecedented reduction in popular support for democracy represents a risk of democratic deconsolidation. The new situation echoes old debates on the compatibility of democracy with capitalism and socialism. This article provides empirical support for the incompatibility of socialism with democracy by providing evidence suggesting that when citizens adopt egalitarianism as a supreme value, they are ready to sacrifice democracy for the sake of equality. Using individual data, we observe that the decline in support for democracy over generations and over time is accompanied by rising support for egalitarian values in US and European democracies. Moreover, democracies with stronger preferences for egalitarianism also have less public support for democracy, suggesting a tradeoff between both values.
Old Boys' Clubs and Upward Mobility Among the Educational Elite
Valerie Michelman, Joseph Price & Seth Zimmerman
NBER Working Paper, March 2021
This paper studies how exclusive social groups shape upward mobility, and whether interactions between low- and high-status peers can integrate the top rungs of the economic and social ladder. Our setting is Harvard in the 1920s and 1930s, where new groups of students arriving on campus encountered a social system centered on exclusive old boys' clubs. We combine archival and Census records of students' college lives and long-run careers with a room-randomization design based on a scaled residential integration policy. We first show that high-status students from prestigious private high schools perform worse academically than other students, but are much more likely to join exclusive campus clubs. The club membership premium is large: members earn 32% more than other students, and are more likely to work in finance and join country clubs, both characteristic of the era's elite. The membership premium persists after conditioning on high school, legacy status, and even family. Random assignment to high-status peers raises the rates at which students join exclusive social groups on campus, but overall effects are driven entirely by large gains for private school students. In the long run, a shift from the 25th percentile of residential peer group status to the 75th percentile raises the rate at which private school students work in finance by 41% and their membership in adult social clubs by 26%. We conclude that social interactions among the educational elite mediate access to top positions in the economy and society, but may not provide a path to these positions for underrepresented groups. Differences in academic and career outcomes by high school type persist through at least the class of 1990, suggesting that this causal channel remains relevant at contemporary elite universities.
Ideology selectively shapes attention to inequality
Hannah Waldfogel et al.
Proceedings of the National Academy of Sciences, 6 April 2021
Contemporary debates about addressing inequality require a common, accurate understanding of the scope of the issue at hand. Yet little is known about who notices inequality in the world around them and when. Across five studies (N = 8,779) employing various paradigms, we consider the role of ideological beliefs about the desirability of social equality in shaping individuals’ attention to — and accuracy in detecting — inequality across the class, gender, and racial domains. In Study 1, individuals higher (versus lower) on social egalitarianism were more likely to naturalistically remark on inequality when shown photographs of urban scenes. In Study 2, social egalitarians were more accurate at differentiating between equal versus unequal distributions of resources between men and women on a basic cognitive task. In Study 3, social egalitarians were faster to notice inequality-relevant changes in images in a change detection paradigm indexing basic attentional processes. In Studies 4 and 5, we varied whether unequal treatment adversely affected groups at the top or bottom of society. In Study 4, social egalitarians were, on an incentivized task, more accurate at detecting inequality in speaking time in a panel discussion that disadvantaged women but not when inequality disadvantaged men. In Study 5, social egalitarians were more likely to naturalistically point out bias in a pattern detection hiring task when the employer was biased against minorities but not when majority group members faced equivalent bias. Our results reveal the nuances in how our ideological beliefs shape whether we accurately notice inequality, with implications for prospects for addressing it.
The COVID-19 Pandemic and the Rental Market: Evidence From Craigslist
John Kuk et al.
American Behavioral Scientist, forthcoming
Past research has demonstrated the racially and spatially uneven impacts of economic shocks and environmental disasters on various markets. In this article, we examine if and how the first few months of the COVID-19 pandemic affected the market for rental housing in the 49 largest metropolitan areas in the United States. Using a unique data set of new rental listings gathered from Craigslist and localized measures of the pandemic’s severity we find that, from mid-March to early June, local spread of COVID-19 is followed by reduced median and mean rent. However, this trend is driven by dropping rents for listings in Black, Latino, and diverse neighborhoods. Listings in majority White neighborhoods experience rent increases during this time. Our analyses make multiple contributions. First, we add to the burgeoning literature examining the rental market as a key site of perpetuating sociospatial inequality. Second, we demonstrate the utility of data gathered online for analyzing housing. And third, by reflecting on research that shows how past crises have increased sociospatial inequality and up-to-date work showing the racially and spatially unequal effects of the COVID-19 pandemic, we discuss some possible mechanisms by which the pandemic may be affecting the market for rental housing as well as implications for long-term trends.
Income robustly predicts self-regard emotions
Eddie Tong et al.
There is robust evidence that higher income makes people evaluate their lives more favorably, but there is no consistent evidence on whether it makes people feel better. Analyzing data from five large surveys spanning 162 countries, we predicted and found the most comprehensive evidence to date that income reliably predicted greater positive self-regard emotions (e.g., pride) and lower negative self-regard emotions (e.g., anxiety). In contrast, its relationships with other-regard emotions (e.g., gratitude, anger) and global emotions (e.g., happiness) were weaker in magnitude and difficult to replicate. In addition, income predicted higher (lower) levels of positive (negative) self-regard emotions about 10 years later, controlling for the same self-regard emotions at baseline. Sense of control mediated the relationships between income and both positive and negative self-regard emotions. Income predicted self-regard emotions as strongly as it has been known to predict life evaluation. Hence, having more money makes people feel more proud, contented, and confident and less sad, afraid, and ashamed, but does not affect whether they feel grateful, caring, and angry.
Social Class — Not Income Inequality — Predicts Social and Institutional Trust
Youngju Kim et al.
Social Psychological and Personality Science, forthcoming
Trust is the social glue that holds society together. The academic consensus is that trust is weaker among lower-class individuals and in unequal regions/countries, which is often considered a threat to a healthy society. However, existing studies are inconsistent and have two limitations: (i) variability in the measurement of social class and (ii) small numbers of higher level units (regions/countries). We addressed these problems using large-scale (cross-)national representative surveys (encompassing 560,000+ participants from 1,500+ regional/national units). Multilevel analysis led to two consistent sets of findings. First, the effects of social class on social trust were systematically positive, whereas the effects on institutional trust depended on the way social class was measured. Second, the effects of income inequality on social and institutional trust were systematically nonsignificant and smaller than the smallest negative effect of interest. Our findings suggest that researchers need to update their knowledge: social class — not income inequality — predicts trust.
Stunted upward mobility in a learning environment reduces the academic benefits of growth mindsets
Lile Jia et al.
Proceedings of the National Academy of Sciences, 9 March 2021
Does stunted upward mobility in an educational system impede beneficial psychological processes of learning? We predicted that growth mindsets of intelligence, a well-established psychological stimulant to learning, would be less potent in low-mobility, as compared to high-mobility, learning environments. An analysis of a large cross-national dataset and a longitudinal experiment accumulated converging evidence for this hypothesis. Study 1 examined data from 15-y-old students across 30 countries (n = 235,141 persons). Replicating past findings, growth mindsets positively predicted students’ math, science, and reading literacy. More importantly, the country-level indicator of educational mobility (i.e., the percentage of children from low-education households to graduate from tertiary education) moderated the effect of growth mindsets. Depending on the subject, the gain in predicted academic performance from a one-unit increase in growth mindsets was reduced by 42 to 45% from a high-mobility to a low-mobility country. Results were robust with or without important covariates. Study 2 experimentally manipulated people’s perception of mobility in a carefully constructed learning environment. The moderating role of educational mobility was replicated and extended to learning behavior, which subsequently predicted performance. Evidence further suggests that in high-mobility environments, both advantaged and disadvantaged learners benefited from growth mindsets, albeit likely through diverging mechanisms; when the effect of growth mindsets was attenuated in low-mobility environments, the potential for the disadvantaged to overcome the performance gap was also limited. Implications for galvanizing the upward mobility of the disadvantaged, evaluating the effectiveness of mindset interventions, and conceptualizing social mobility from a psychological perspective are discussed.