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Economic Inequality
Income Inequality and Class Divides in Parental Investment
How does rising income inequality reduce intergenerational mobility? Using data from the Consumer Expenditure Study between 1980 and 2014, Daniel Schneider, Orestes P. Hastings, and Joe LaBriola find that increased income inequality at the state level leads wealthy parents to spend not just more money, but also a larger share of their income on lessons, schooling, and childcare. The authors hypothesize that inequality heightens anxiety among high-socioeconomic status parents, resulting in larger class gaps in financial investments in children. Since parental investment transmits advantage across generations, this paper contributes to the growing body of research indicating a negative relationship between rising inequality and intergenerational mobility.
This paper was selected for Tobin’s 2018 Prize for Exemplary Work on Inequality and Decision Making.
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High Stakes: A Little More Cheating, A Lot Less Charity
How do people make decisions about charitable giving? In this experimental study, Zoe Rahwan, Oliver Hauser, Ewa Kochanowska, and Barbara Fasolo find evidence that as people resist the temptation to cheat for larger rewards they are likely to donate a lesser proportion of those rewards to charity. Participants in the study were randomly selected into high stakes and lower stakes groups and then asked to complete a coin-flipping task, with rewards varying from one cent to five dollars per flip. Consistent with previous studies, the authors find that increasing the possible reward for each winning flip only slightly increased participants’ propensity to cheat. However, after the game each participant was given the opportunity to donate a percentage of their earnings to a well-known charity of their choice. The participants in the high stakes group donated proportionately less to charity than those in lower stakes groups. Moreover, only the participants who resisted cheating in high stakes situations appeared to “leverage” feelings of morality when donating a lower percentage of their earnings to charity. The authors argue that these findings suggest that individuals who resist immoral self-interested behavior may then feel comfortable “balancing” these actions by refraining from pro-social behavior.
[Read the paper]
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