We show that genetic endowments linked to educational attainment strongly and robustly predict wealth at retirement. The estimated relationship is not fully explained by flexibly controlling for education and labor income. We therefore investigate a host of additional mechanisms that could help to explain the gene-wealth gradient, including inheritances, mortality, savings, risk preferences, portfolio decisions, beliefs about the probabilities of macroeconomic events, and planning horizons.
D31: Personal Income, Wealth, and Their Distributions
In this paper, we revisit our 2004 paper that found a strong positive association between happiness and future outcomes, based on data for Russia in the years 1995-2000. This paper takes advantage of a new Gallup panel for the U.S. for 2014-2016. We essentially duplicate our original method, and add some new specifications. We find remarkably similar patterns and associations between initial period happiness and later period outcomes in the U.S., based on a very different time and sample from Russia in the 1990’s.
We provide a common set of life-cycle earnings statistics based on administrative data from the United States, Canada, Denmark and Sweden. We find three qualitative patterns, which are common across countries. First, top-earnings inequality increases over the working lifetime. Second, the extreme right tail of the earnings distribution becomes thicker with age over the working lifetime. Third, top lifetime earners exhibit dramatically higher earnings growth over their working lifetime.
We show that optimistic beliefs regarding the role of effort in success, while leading to success, diminish the individual’s sympathy toward the unsuccessful. We generate random variation in the degree of optimism about the productivity of effort via an effective educational intervention. We find that treated children, holding significantly more optimistic beliefs, are no less likely than control to give to unlucky recipients, but significantly less likely to give to those who failed at a real effort task despite an opportunity to build skill.
Do people give primacy to merit when luck partly determines earnings? This paper reports from a novel experiment where third-party spectators have to decide whether to redistribute from a high-earner to a low-earner in cases where earnings are determined by luck and merit. Our main finding is that the spectators assign strong primacy to merit in such situations, and as a result violate basic fairness conditions.
There is a striking difference in income inequality and redistributive policies between the United States and Scandinavia. To study whether there is a corresponding cross-country difference in social preferences, we conducted the first large-scale international social preference experiment, with nationally representative samples from the United States and Norway. We introduce a new experimental approach, which combines the infrastructure of an international online market place and the infrastructure of a leading international data collection agency.
Using newly collected cross-country survey and experimental data, we investigate how beliefs about intergenerational mobility affect preferences for redistribution in five countries: France, Italy, Sweden, U.K., and U.S. Americans are more optimistic than Europeans about intergenerational mobility, and too optimistic relative to actual mobility. Our randomized treatment that shows respondents pessimistic information about mobility increases support for redistribution, mostly for equality of opportunity policies.
We develop a new quantile-based panel data framework to study the nature of income persistence and the transmission of income shocks to consumption. Log-earnings are the sum of a general Markovian persistent component and a transitory innovation. The persistence of past shocks to earnings is allowed to vary according to the size and sign of the current shock. Consumption is modeled as an age-dependent nonlinear function of assets, unobservable tastes and the two earnings components.
This paper discusses the relevance of recent research on the economics of human development to the work of the Human Development and Capability Association. The recent economics of human development brings insights about the dynamics of skill accumulation to the literature on capabilities. Skills embodied in agents empower people. Enhanced skills enhance opportunities and hence promote capabilities. We address measurement problems common to both the economics of human development and the capability approach.
In this paper we document the main features of the distributions of wages, earnings, consumption and wealth in Japan since the early 1980s using four main data sources: the Basic Survey on Wage Structure (BSWS), the Family Income and Expenditure Survey (FIES), the National Survey of Family Income and Expenditure (NSFIE) and the Japanese Panel Survey of Consumers (JPSC). We present an empirical analysis of inequality that specifically considers the path from individual wages and earnings, to household earnings, after-tax income, and finally consumption.