Recent Poverty, Race, and Inequality Research

Economic Opportunity and Growth

Public Preferences for Redistribution

According to the General Social Survey (GSS), confidence in banks and financial institutions sank from more than 30 percent in the mid-2000s to 8 percent in 2010. Despite the rise of public discontent with the private sector, little is known about how the public views corporations’ responsibilities and performance in addressing economic and social problems. In a project receiving support from the Russell Sage Foundation, IPR sociologist Leslie McCall and her colleagues Jonas Edlund and Arvid Backstrom of Sweden’s Umea University are examining what citizens see as the proper mix and balance of state and market policies. To explore the issue, however, preferences for state and market institutions must be in the same data set. Yet existing surveys tend only to ask about public attitudes toward the welfare state. To fill this gap, the team will collect new data by adding 10 questions to the 2014 GSS. The same set of questions will also be included in a 2014 Swedish and Danish survey. Given the distinctive roles that market institutions play in different societies, the researchers will compare results from the United States, Sweden, and Denmark to assess if and how views vary between the countries. They anticipate that Americans’ pro-market views will lead them to trust market institutions more than government institutions in terms of reducing inequality (and vice versa in Sweden). Preliminary findings, however, suggest that the results might be less clear cut.

Social Networks and Agricultural Technology

IPR economist Lori Beaman received a 2013 National Science Foundation Faculty Early Career Development (CAREER) Award. It will support her work focusing on a major puzzle of development economics: Why do small-scale farmers avoid adopting simple, profit-enhancing technologies? Policymakers can rarely alter people's social networks, but Beaman hopes to enumerate ways in which policymakers can use the existing social networks in developing countries to improve the effectiveness of policy—in particular to increase the adoption of simple agricultural technologies that can raise incomes and reduce poverty. In three projects taking place in either Mali or Malawi, she and her colleagues will examine a few aspects of how farmers learn from one another and information diffuses through social networks.

One recent experiment providing fertilizer grants to female rice farmers in Mali shows that the women who received fertilizer used more fertilizer on their plots, as well as using complementary aids, such as herbicides and hired labor. This reveals that farmers respond to an increase in one production factor (input), such as fertilizer expenses or family labor, by re-optimizing others, making it challenging to isolate the returns to any one factor. Additionally, while the increase in inputs led to a considerable increase in production, Beaman and her colleagues recorded no evidence that profits increased. It suggests that fertilizer’s impact on profits is small compared with other sources of variation. This could make it difficult for farmers to learn about what they could gain from using fertilizer, and it could also affect their decision to adopt it even when money is not an issue in obtaining it. The results were published in the American Economic Review: Papers & Proceedings.

Economic Opportunities for Women

More than 75 percent of the world’s poor do not have a formal bank account, constraining their ability to save, borrow, and otherwise engage in financial operations that could improve their lives. Organizations are creating savings groups in developing nations as a way to meet such untapped needs. Beaman was part of a group of cross-disciplinary researchers who conducted a large-scale randomized control experiment of a community savings program in rural Mali, West Africa. Oxfam’s Saving for Change (SfC) program integrates villager-managed saving and lending groups with local training and education. The program was offered to a random sample of 250 villages in Mali’s Ségou region. Results show that women offered SfC in their village took out twice as many loans from their SfC program, saved about 30 percent more, and had less precarious food situations than those in non-SfC villages. They were also slightly less likely to seek loans from family and friends, a culturally shameful act.

How Job Networks Affect Women

Up to 50 percent of jobs are obtained through the use of informal channels, including employee referrals. Using a field experiment in the African nation of Malawi where men and women applied for future surveyor positions with a local firm, Beaman and her colleagues demonstrate that highly skilled women can be disadvantaged through the use of referrals. In an IPR working paper co-authored with Jeremy Magruder of the University of California, Berkeley and Niall Keleher of Innovations for Poverty Action, they demonstrate that this happens both because most men recommend other men—at a rate that cannot fully be explained by the scarcity of women—and because women refer candidates, particularly female ones, who are unqualified for the position. Developing and testing a theoretical model of referral choice, they show that factors outside of the work affect workers’ referral choice. The authors also document that the best referrals are brought to the firm when men refer male candidates under a performance-based contract, with evidence suggesting that information about female candidates is limited in men’s networks. These observations show that informal hiring processes can lead to distinct job market disadvantages for women, implying that some of the easiest policy responses, for instance, improving women’s skills and knowledge, might not be enough to eliminate the gender gap in wages. Beaman plans to conduct a follow-up experiment to explore additional underlying mechanisms, such as testing the observation that women might be referring less qualified women to avoid competitive environments.

Impact of Microcredit Lending

In work with MIT’s Abhijit Banerjee, Esther Duflo, and Rachel Glennerster, economist and IPR associate Cynthia Kinnan reports on the first randomized evaluation of introducing a standard microcredit lending program in a new market. These lenders, referred to as microfinance institutions (MFIs), supply loans to poor households, targeting mostly women. In 2005, half of 104 areas in Hyderabad, India, were randomly selected to open a branch of Spandana, an MFI. Around 18 months after the introduction of microfinance, 6,850 households were surveyed. Results show that while households in treatment areas were no more likely to start a new business, those who already had a business invested more in them. Three to four years after MFI introduction, when households in treatment areas had been borrowing more for longer periods, the average business was no more profitable, though the largest businesses did benefit. Treatment-area households reduced spending on “temptation goods” such as alcohol, gambling, and snacks. No improvements, however, were found for health, education, and women’s empowerment, and other outcomes that microfinance is often believed to affect. The study suggests that while microcredit lending is a valuable part of poor households’ portfolios, it does not seem to lead to the miraculous social transformation that some have claimed.

Poverty and Income Inequality

American Beliefs and Income Inequality

While most research asserts that Americans generally care little about income inequality, McCall is upending conventional wisdom on the topic with her 2013 book, The Undeserving Rich: American Beliefs About Inequality, Opportunity, and Redistribution (Cambridge University Press). McCall extracts public opinion data from the General Social Survey and others to undertake one of the most comprehensive examinations of actual public perceptions of inequality over the past 25 years. She uses the data to debunk several ideas, including the widespread one that Americans do not care about income inequality as long as they feel they are getting a fair shot at getting ahead through hard work, or what she calls the “American dream ideology.” She shows how Americans do not immediately connect their concerns about inequality to a desire for increased taxes on the rich, but they do connect high inequality to limited social mobility, favoring policies that expand opportunity and equality in the workplace. Notably, she explains that concerns about inequality were highest not during periods of recession, but in the subsequent recoveries when people did not feel that middle- and lower-income Americans were sharing in the gains. Her nuanced framework demonstrates that beliefs about income inequality are not opposed to notions of equal opportunity, but rather inextricably linked to them.

Public Views About Inequality

Most people assume that Americans care more about equality of opportunity than equality of outcomes. McCall and IPR social psychologist Jennifer Richeson are testing this proposition. In contrast to the traditional view, Americans might now consider rising inequality itself as a threat to the “American Dream” of open and expanding opportunities. McCall and Richeson situate this perspective within a new “opportunity model” of beliefs about inequality. In this model, worries about the erosion of opportunity are partly attributed to rising economic inequality. This new frame of mind, unlike the traditional stance, should be open to supporting redistributive policies—but only if they lead to more opportunities in the labor market. Examples would be limiting executive pay and lifting pay in the middle and bottom—or by taxing and spending for better schools or job training. Their study has two main components: A media analysis of how American inequality has been discussed over the past 30 years, followed by a series of social psychological experiments designed to probe the conditions that provoke heightened concerns about inequality and support for policies designed to reduce it. In combining a media study with psychological experiments, McCall and Richeson aim to learn more about how conceptions of inequality, opportunity, and redistribution intertwine in American culture. The Russell Sage Foundation has provided support for the project.

Price Effects of Cash vs. In-Kind Transfers

A central question in anti-poverty policy is whether transfers should be made in-kind or as cash, with the oft-cited rationale for in-kind transfers being to encourage consumption of certain goods. Cash and in-kind transfers both make the recipients better off, which can increase their demand for goods and, in turn, increase prices. However, in-kind transfers can also increase the local supply of goods, driving prices down. In a working paper with Jesse Cunha of the Naval Postgraduate School and Stanford’s Giacomo De Giorgi, economist and IPR associate Seema Jayachandran tests this hypothesis. She compares how cash and in-kind transfers affect local prices using a program in Mexico that randomly assigned villages to either receive boxes of food trucked into the village, equivalently valued cash transfers, or no transfers. The researchers show that prices are significantly lower under in-kind transfers compared with cash transfers. Prices of goods other than those transferred are also affected by a small amount, but overall these general effects only modestly affected purchasing power. The exception is in remote villages and geographically isolated areas, where both negative and positive price effects are larger in magnitude, and where many of the world’s poorest people live.

Child Poverty Crisis in California

Social policy professor and IPR associate Dan Lewis and Kendra Alexander, an IPR graduate research assistant, recently completed a report assessing child poverty in California as part of a conference convened by GRACE, a nonprofit associated with the Daughters of Charity. In their report, Lewis and Alexander conclude that tax credits, universal access to pre- kindergarten programs, and comprehensive local programs addressing job placement, mental health, medical care, nutrition, and social services, should form the basis of California’s anti-poverty agenda if it hopes to succeed. It was presented on December 16 at “California’s Crisis: Ending Child Poverty,” where nearly 250 representatives from government, businesses, and nonprofit organizations gathered to discuss the major causes of structural poverty, analyze and formulate responses to these problems, and plan how to implement the recommended responses. Marian Wright Edelman, founder and president of the Children’s Defense Fund, gave a keynote talk.

Class Dynamics and Social Mobility

Revisiting the Black Middle Class

Sociologist and IPR associate Mary Pattillo recently released the second edition of her groundbreaking book Black Picket Fences: Privilege and Peril Among the Black Middle Class—one of only a few ethnographic studies of a black middle-class neighborhood. In the 2013 edition (University of Chicago Press), she revisited the same topics discussed in the 1999 original—namely the economy, crime, and housing—and put them in context with the economic downturn and the foreclosure crisis. She also updated the book with new interview data, offering descriptive demographics to re-examine the trajectories of Groveland’s residents and the neighborhood as a whole. With this second edition, Pattillo furthers her thought-provoking work on the black middle class, which continues to be relevant as middle-class blacks still live in neighborhoods that are much more disadvantaged than their white counterparts—even as they move to the suburbs in large numbers. Pattillo is Harold Washington Professor of Sociology and African American Studies.

Maintaining Racial Inequality with a Few Racists?

IPR social demographer Quincy Thomas Stewart is writing a book that scrutinizes the history of racial inequality since Jim Crow and the social organizations involved in maintaining black-white inequities. Tentatively titled “How Many Racists? How Everyday People Contribute to a System of Social Inequality,” it sheds new light on historical evidence indicating that a large number of racist advocates is needed to maintain institutional inequalities. Additionally, it contextualizes recent research which points to a significant decline in the number of people who hold racist beliefs that has not been paralleled by a similar decline in racial inequality—a fact that refutes the idea that the number of racists is what counts. Using an agent-based model of a Nash Bargaining game, which is a simple two-person bargaining model, Stewart’s investigation demonstrates that a system inspired by biased social institutions, even though they are administered or used by nonbiased (nonracist) individuals, can maintain racial inequality with a few, or even no, racists. The book will focus on the social dynamics that lead to the emergence of racial inequality in an artificial society, the actors and factors that sustain it once it is established, and the policies that can be used to undermine racial inequality.

Signaling Racial Identity

While the magnitude of current racial disparities in educational achievement is clear and widely accepted, the source is not. One theory suggests that many minority students are socially marginalized and face a unique signaling quandary. This means that African American students must act in ways that “signal” to their black peers that they are “black enough,” while signaling to the larger society that they are “white enough” to be American. In a project with Rachelle Winkle-Wagner of the University of Wisconsin–Madison, Stewart examines this using an agent-based model and qualitative data from a larger study of the college experiences of African American undergraduate women. The model analyzes the social psychological mechanisms embedded in the signaling quandary, while the qualitative study assesses how, and to what extent, black college women experience the quandary. Their results suggest that their experiences are unique. The women in the qualitative study felt the need to simultaneously signal their racial identity to white and black peers using several widely recognized behaviors that often conflicted with one another. The researchers did not find, though, that the signaling quandary was related to an anti-intellectual culture in the black community or to low achievement among black college women.

Affirmative Action and Opportunity

Race-Conscious Affirmative Action

Sociologists Anthony Chen of IPR and Lisa Stulberg of New York University have dug into university archives around the country to fill out current understanding of how race-conscious affirmative action programs came to be instituted. Their most recent work examines how concerns about racial inequality in public education—many of which still exist today—contributed to early affirmative action programs. They document the creation of these programs in 17 different schools, finding that race-conscious affirmative action was first adopted by a set of Northern schools and universities led by administrators who were inspired by civil rights protests against Jim Crow segregation in the South. A second wave of programs were later adopted by many of the nation’s highly selective institutions in response to campus-based student protests, suggesting that their creation was largely due to a ripple effect from the Southern-based, church-led civil rights movement. The article appeared in Sociology of Education.

Race, Interracial Relations, and Prejudice

A Majority-Minority America

The racial and ethnic diversity of the United States is rapidly increasing, such that racial and ethnic minorities are expected to comprise more than 50 percent of the U.S. population by 2042, effectively creating a so-called “majority-minority” nation. With Northwestern graduate student Maureen Craig, also a dissertation fellow at the American Bar Foundation, Richeson examines how white Americans react to information about the impending population changes. In a series of experiments, they present consistent evidence that exposure to information about shifting U.S. racial demographics evokes the expression of more implicit and explicit racial bias and a greater tendency to endorse political conservatism. These are brought about by a perception that increases in racial minorities’ societal status will reduce white Americans’ influence in society. The effects suggest that rather than ushering in a more tolerant future, the increasing national diversity could actually yield more intergroup hostility and have untold influence on white Americans’ political participation both now and in the decades to come. Richeson and Craig point to the way the media and institutions frame the demographic shift, for instance by lumping all non-white groups together, as exacerbating the concern felt by whites.

Fostering Positive Interracial Interactions

As the United States becomes increasingly diverse, Richeson and her colleagues continue to investigate how intergroup contact will shape interactions between whites and other racial minorities, particularly as past research suggests inter-racial contact is a stressful experience for all races. In work with Northwestern psychologist Daniel Molden and other colleagues, Richeson is setting out a model for how such interracial interactions can unfold more smoothly for participants of all races. In previous work, the researchers reviewed three motivational mindsets and how they might foster better contact between people of different races. Drawn from the psychology literature, the three mindsets were “approach-avoidance,” “prevention-promotion,” and “performance vs. learning goals.” For each of these, the more positive strategies of approach, promotion, and learning goals were seen as more likely to lead to positive interactions, thus avoiding the cognitive and interpersonal costs often observed. Building on the model and based on a previous experiment that successfully taught participants how to implement a positive strategy of interracial contact, Richeson is currently working on several projects that would further elucidate how Americans could engage in more rewarding contact with a person of a different race or ethnicity. The project receives support from the National Science Foundation.

Racial Disparities in Educational Achievement

Research has documented vast disparities in the well-being of native-born and foreign-born blacks in the United States, with foreign-born blacks often faring better in an array of social outcomes. Prior research, however, has singularly focused on native and immigrant disparities among blacks and failed to consider how race and immigrant status work together to shape racial inequality. Stewart is working with Northwestern graduate student Jordan Conwell to shed light on how race and being an immigrant might shape children’s educational achievement and their experiences of racial inequality in school. Using data from the Early Childhood Longitudinal Program, the two researchers will use a growth curve analysis to assess this. Given the longstanding argument that black American culture drives disparities in educational achievement, their work seeks to demonstrate whether immigrant-born blacks do exhibit racial disparities in achievement. And if so, are such educational outcomes truly distinct from those of U.S.-born blacks?

Segregation and Educational Attainment

Using data drawn from the Panel Study of Income Dynamics and several U.S. censuses, IPR sociologist Lincoln Quillian examined the effects of racial and economic residential segregation on high school and college completion rates. Quillian contrasted outcomes for youth raised in different metropolitan areas with varying levels of segregation to incorporate the effects of residential segregation outside of the individuals’ neighborhoods. His analysis showed that income-driven segregation is associated with lower high school graduation rates among adolescents from poor backgrounds, but has no effect on graduation rates for students from more affluent backgrounds. Likewise, black–white segregation is associated with lower high school graduation rates and lower college enrollment for black students, with no effect on rates for white students. The study, which is forthcoming in Social Problems, suggests that while residential segregation harms the educational attainment of disadvantaged children, it does not significantly increase educational attainment for more advantaged children.

Urban Black Students Bussed to Affluent Schools

In research published in Sociology of Education, social policy professor and IPR associate Simone Ispa-Landa conducted a study of the “Diversify” program, an urban-to-suburban racial integration program, to examine how gender politics and gender performance can have an impact on the way the minority students were seen at the school. Black boys in Ispa-Landa’s study found themselves simultaneously feeding into stereotypes that made them seem “street smart” or “tough.” They also switched their speech and mannerisms to make their white counterparts feel more comfortable. However, while black boys could use these stereotypes to their advantage, the black girls in the study reported feeling penalized for doing the same. The girls also felt excluded from the sports and activities that might have provided them with a higher social status. The study received widespread media coverage from many outlets, including The Washington Post, The Atlantic, and The Huffington Post.