Dynamics of inequality

There are two broad views as to why people stay poor. One emphasizes differences in fundamentals, such as ability, talent, or motivation. The poverty traps view emphasizes differences in opportunities that stem from access to wealth. To test these views, we exploit a large-scale, randomized asset transfer and an 11-year panel of 6,000 households who begin in extreme poverty. The setting is rural Bangladesh, and the assets are cows. The data support the poverty traps view—we identify a threshold level of initial assets above which households accumulate assets, take on better occupations (from casual labor in agriculture or domestic services to running small livestock businesses), and grow out of poverty. The reverse happens for those below the threshold. Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated in the work they do at baseline and that the gains arising from eliminating misallocation would far exceed the program costs. Our findings imply that large transfers, which create better jobs for the poor, are an effective means of getting people out of poverty traps and reducing global poverty.

We use linked parent-child administrative data for five countries in North America and Europe, as well as detailed survey data for two more, to investigate methodological challenges in the estimation of absolute income mobility. We show that the commonly used "copula and marginals" approximation methods perform well across countries in our sample, and the greatest challenges to their accuracy stem not from assumptions about relative mobility rates over time but from the use of nonrepresentative marginal income distributions. We also provide a multicountry analysis of sensitivity to specification decisions related to age of income measurement, income concept, family structure, and price index.

Understanding the roots of violent and criminal behaviour is crucial for developing effective prevention and intervention strategies. A large body of research has highlighted the complex interplay between genetic, environmental, and psychological factors in explaining such behaviours. This project will focus the long-term consequences of early exposure to abuse and violence.

Are slums stepping-stones to better lives or poverty traps? To do so, we will leverage unique administrative data from Brazil alongside an intergenerational quantitative urban model which integrates human capital investment decisions and thus social mobility.

This research aims at identifying and documenting barriers for 'middle class' students with excellent academic results to gain entry into an undergraduate programme at an elite institution.

We measure the contribution of firm-embedded productivity to cross-country income differences. By firm-embedded productivity we refer to firm-specific components of productivity, such as blueprints, management practices, and other intangible capital. Using micro-level data for multinational enterprises (MNEs), we compare market shares of the same MNE in different countries and document that they are systematically larger in less developed countries. This indicates that MNEs face less competition and that firm-embedded productivity is scarce in these countries. We implement a measure of firm-embedded productivity based on this observation. Differences in firm-embedded productivity account for one-third of the cross-country variance in output per worker in our sample.

Using detailed household-level data from Malawi on physical quantities of agricultural outputs and inputs, we measure farm total factor productivity (TFP), controlling for land quality, rain, and transitory shocks. We find that operated land size and capital are essentially unrelated to farm TFP, implying substantial factor misallocation. The agricultural output gain from a reallocation of factors to their efficient use among existing farmers is a factor between 1.7- and 2.8-fold. We provide suggestive evidence connecting misallocation with the extent of land markets and illustrate how an efficient allocation via rental markets can substantially reduce agricultural income inequality and poverty.

Technical change that extends market scale can generate winner-take-all dynamics, with large income growth among top earners. I test this "superstar model" in the entertainer labor market, where the historic rollout of television creates a natural experiment in scale-related technological change. The resulting inequality changes are consistent with superstar theory: the launch of a local TV station skews the entertainer wage distribution sharply to the right, with the biggest impact at the very top of the distribution, while negatively impacting workers below the star level. The findings provide evidence of superstar effects and distinguish such effects from popular alternative models.

We examine the role of technological change in explaining the large and persistent decline in earnings following job loss. Using detailed skill requirements from the near universe of online vacancies, we estimate technological change by occupation and find that technological change accounts for 45 percent of the decline in earnings after job loss. Technological change lowers earnings after job loss by requiring workers to have new skills to perform newly created jobs in their prior occupation. When workers lack the required skills, they move to occupations where their skills are still employable but are paid a lower wage.

We examine intergenerational mobility in the very long run, across generations that are six centuries apart. We exploit a unique dataset containing detailed information at the individual level for all people living in the Italian city of Florence in 1427. These individuals have been associated, using their surnames, with their pseudo-descendants living in Florence in 2011. We find that long-run earnings elasticity is about 0.04; we also find an even stronger role for real wealth inheritance and evidence of persistence in belonging to certain elite occupations. Our results are confirmed when we account for the quality of the pseudo-links and when we address the potential selectivity bias behind the matching process. Finally, we frame our results within the existing evidence and argue that the quasi-immobility of preindustrial society and the existence of multigenerational effects might explain the long-lasting effects of ancestors’ socioeconomic status.

Full days worked at home account for 28 percent of paid workdays among Americans 20-64 years old, as of mid 2023, according to the Survey of Working Arrangements and Attitudes. That’s about four times the 2019 rate and ten times the rate in the mid-1990s that we estimate in time-use data. We first explain why the big shift to work from home has endured rather than reverting to pre-pandemic levels. We then consider how work-from-home rates vary by worker age, sex, education, parental status, industry and local population density, and why it is higher in the United States than other countries. We also discuss some implications of the big shift for pay, productivity, and the pace of innovation. Over the next five years, U.S. business executives anticipate modest increases in the share of fully remote jobs at their own companies and in the share of jobs with hybrid arrangements, whereby the employee splits the workweek between home and employer premises. Other factors that portend an enduring shift to work from home include the ongoing adaptation of managerial practices and further advances in technologies, products, and tools that support remote work.

This study measures spending power inequality within age cohorts and estimates fiscal progressivity via lifetime net tax rates. We find, first, that inequality in income and especially wealth dramatically overstates inequality in spending power. Second, inequality in current spending power differs from that in lifetime spending power because of credit constraints, in-kind government benefits, and other factors. Third, the US fiscal system is highly progressive once cohorts are old enough to have highly dispersed human wealth. Fourth, households’ rankings based on current income can differ substantially from their rankings based on lifetime resources. Fifth, current-year net tax rates substantially understate fiscal progressivity.

This paper studies the extent to which the cyclicality of occupational mobility shapes that of aggregate unemployment and its duration distribution. We document the relation between workers' occupational mobility and unemployment duration over the long run and business cycle.

Over the last decade, socio-economic mobility has declined and the shares in employment of low- and high-paying occupations has increased. This work investigates if job polarization has been a cause of the decline in mobility in the UK.

This paper is about an understudied, yet important, aspect of social mobility – absolute mobility, which measures the share of children with higher incomes compared to their parents around the same age.

This research estimates the effect of breastfeeding on child development: cognitive and socio-emotional, as well as health. Breastfeeding is just one of many ways in which mothers can influence their child’s development, and mothers who breastfeed may also be more or less likely to make other investments that affect their child’s development.

The importance of siblings and the quality of their bond for children's development have not been sufficiently explored, even though most children have at least one sibling. Policy has instead focused on stimulating interactions between parents and the target child. Understanding the role of siblings in the human capital formation process can provide another policy tool to tackle inequality.

Can transport infrastructure promote long-term labor market opportunities and sever the occupational tie between parents and their children? Transport infrastructure arguably improves individuals’ economic opportunities by connecting them to employment possibilities that are farther away, and by creating better options locally.‍

Recent empirical work documents significant long-run wealth-rank correlations. This is a puzzle, in that the standard macro models of wealth dynamics generate a realistic wealth distribution but cannot capture these patterns. This paper identifies identifying a parsimonious extension of the standard model of wealth dynamics to account for these novel facts on the long-run persistence of wealth-ranks as well as for the observed moments of the wealth distribution.

If disadvantaged groups move to better neighborhoods at scale, does this affect opportunity in those neighborhoods for future generations? This paper answers this question by studying the largest natural experiment in moving to opportunity in US history: the Great Migration – when 6 million southern African Americans migrated North between 1916 and 1970 to escape racial prejudice and a lack of economic opportunity in the US South.

Human development has many dimensions that are important for life course outcomes, including cognitive abilities and socio-emotional skills. These different skills are correlated across generations and this plays an important (although not exclusive) role in the intergenerational transmission of inequality. The evidence on the intergenerational transmission of different types of skills is still scarce.

The authors devise a method to simulate the impact of COVID-19 triggered lockdowns on the profits of formal-sector firms, using available corporate tax records. They focus on ten lower-income countries, for which data is typically scarcer.

This paper studies the intergenerational mobility of the children of immigrants over 130 years of US history and answers two related questions: (1) Are children of immigrants more likely to move up in the economic ladder than children of natives from similar economic backgrounds? (2) Are children of contemporary immigrants more or less likely to move up in the economic ladder than children of immigrants from 100 years ago?

This research brings new individual level data on union membership in the US collected from Gallup public opinion polls going back to the 1930s to answer the question of the causal effect of unions on inequality.

This study uses lab experiments to investigate whether the introduction of a universal basic income leads to lower worker effort and productivity when automation (e.g. by robots) creates unemployment.

By generating persistent movements in wealth and income inequality in an economy where rich and poor hold very different portfolios of assets, this research shows that business cycles play an important role in the evolution of inequality over long historical periods.