Recent Poverty, Race, and Inequality Research

Economic Opportunity and Growth

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. IPR economist Lori 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 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 slightly 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. The project received support from the Bill & Melinda Gates Foundation.

Agriculture constitutes the livelihood of 70 percent of Africans, yet many farming innovations such as hybrid seeds or fertilizers that could improve crop yields, and thus lives, are never adopted. To determine whether lack of access to capital is a primary reason, Beaman is involved in another randomized experiment of an agricultural microfinance project, managed by a local organization working with the international organization Save the Children. Of 198 villages in Mali’s Skiasso region, 88 were selected for the treatment group, where women were offered loans of about 40,000 West African francs, around $85 at the time, with nearly one in five accepting one. Another 800 women in the control-group villages were given a cash grant, which they did not have to repay. The findings were striking: Those female farmers who received the cash grants earned more and invested their profits in their plots the following year. Yet the loans did not have the same impact. Beaman will continue work to better understand the returns to capital and why women were more likely to take a grant—but not a loan—to improve their plots.

How Job Networks Affect Women

Using a field experiment in the East African nation of Malawi where men and women applied for future surveyor positions with a local firm, Beaman and her colleagues find that highly skilled women are systematically disadvantaged through the use of candidate referrals. In an IPR working paper co-authored with Jeremy Magruder of the University of California, Berkeley and Nial Kelleher, who directs Innovations for Poverty Action’s methods and training, they demonstrate that this happens both because most men recommend other men, and because women refer fewer qualified candidates for the position. Developing and testing a theoretical model of referral choice, they find that both men’s and women’s biases result from social incentives rather than how they expect men or women will perform. This suggests that using social networks for hiring is an additional way in which gender can handicap women’s job opportunities.

The Miracle of Microfinance

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. Findings 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. However, no improvements 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.

Economic Growth and Corruption

A striking fact about government corruption is that no matter how you measure it, it is higher in poor countries. Looking at industry growth rates in Vietnam, Seema Jayachandran, an economist and IPR associate, and her colleagues at MIT and Duke examine this link in a new working paper where they test the hypothesis that economic growth leads to declines in corruption. They develop a model in which the government is able to extract bribes from firms, but firms might relocate or shut down if the burden of paying bribes is too high. The researchers consider how officials’ choices change as the economy grows in such a model. Using survey data from more than 13,000 Vietnamese firms between 2006 and 2010 and an instrumental variables strategy based on industry growth in other provinces, they test the predictions of the model. They find that faster-growing firms pay out far fewer bribes. Furthermore, this pattern is particularly true for firms that could more easily relocate—for example, because they possess strong property rights for their land. Their results show positive links between economic growth and good institution and suggest that as poor countries develop, corruption might subside on its own.

Poverty and Income Inequality

Public Views About Inequality

Most people assume that Americans care more about equality of opportunity than equality of outcomes. New work by IPR sociologist Leslie McCall and IPR social psychologist Jennifer Richeson is testing this proposition. In contrast to the traditional view, Americans might now consider rising inequality as itself 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 through, for example, limiting executive pay and lifting pay in the middle and bottom, or by taxing and spending for better schools or job training. Their study received funding from the Russell Sage Foundation and has two main components. The first is a media analysis of how American inequality has been discussed over the past 30 years. The second is a series of social psychology 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 hope to learn more about how conceptions of inequality, opportunity, and redistribution are intertwined in American culture.

Class Dynamics and Social Mobility

Revisiting the Black Middle Class

IPR associate Mary Pattillo conducted the research for her award-winning 1999 book Black Picket Fences: Privilege and Peril Among the Black Middle Class (University of Chicago Press) 20 years ago during the Clinton presidency. Following up on her ethnographic study of families and adolescents in a black middle-class neighborhood in Chicago, Pattillo re-interviews some of the same respondents and presents descriptive demographics to re-examine the trajectories of the people and the neighborhood as a whole. In the second edition published in 2013, she revisits topics from the first edition—namely the economy, crime, and housing—with a particular focus on the foreclosure crisis, the impact of public housing policy, and the subjective experience of crime in a moment of economic precariousness. She also puts the book in context with research done since the first edition. Pattillo is Harold Washington Professor of Sociology and African American Studies.

Maintaining Racial Inequality

IPR social demographer Quincy Thomas Stewart is scrutinizing the history of racial inequality since Jim Crow and the social organizations involved in maintaining black-white inequities. A driving question behind this work asks, “How many racists does it take to maintain racial inequality?” Historical evidence indicates that a large number of racist advocates operating in various social arenas is needed. Recent research points to a significant decline in the number of people who hold racist beliefs, refuting the idea that numbers 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. He is laying out his arguments in a book manuscript, tentatively titled How Many Racists? How Everyday People Contribute to a System of Social Inequality. The book will focus on the social dynamics that lead to the emergence of racial inequality in an artificial society, the 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 of the disparities is highly contested. One theory suggests that many minority students are socially marginalized and face a unique signaling quandary—specifically, that African American students must signal to their black peers that they are “black enough” to be members of the African American community, 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 and the University of Maryland’s Rashawn Ray, Stewart uses an agent-based model and qualitative data from a larger study of the college experiences of African American undergraduate women to further unveil the nuances of the signaling quandary discussed in the recent literature. The agent-based model analyzes the nuances of the social psychological mechanisms implicit in the signaling quandary, while the qualitative study assesses how, and to what extent, black college women experience a signaling quandary.  Their results suggest that African American college women face a unique signaling quandary. 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 were often contrary to one another. They did not find, though, that the signaling quandary was related to an anti-intellectual culture or low achievement among black college women.

Affirmative Action and Opportunity

Affirmative Action and Female Leaders

Research led by Beaman focuses on the long-term outcomes of a law that reserved leadership positions for women in randomly selected village councils in India. Beaman and her team collected data in West Bengal between 2006 and 2007 on 8,453 male and female teenagers and their parents in 495 villages. The law was implemented in that region starting in 1998 and from that time, a village council spot could have been reserved for a female leader once, twice, or never. The study, published in Science, showed that the law has led to a direct role-model effect and is changing the way the girls, as well as their parents, think about female roles of leadership. According to the study, the gender gap in aspirations for their children’s career and education closed by 25 percent in parents and 32 percent in adolescents’ own aspirations. Adolescent Indian girls were more likely to attend school and spent less time on household chores in the villages that reserved political positions for women. Since there were no changes in education infrastructure or career options for young women during the study, this suggests that the opening of opportunities for women improved the girls’ attitudes toward higher career aspirations and education goals for women. Beaman’s ongoing research on women’s mobility focuses on women in the labor market and in agriculture in developing countries, as well as in politics.

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 our understanding of how race-conscious affirmative action programs came to be instituted. They find that many affirmative action programs were not initially created as “steam valves” to ease the political pressure generated by campus riots and social unrest in the late 1960s. Instead, their research has uncovered a “first wave” of affirmative action programs that got their start in the early 1960s. These programs were launched by college administrators who were moved by the nonviolent protests of the civil rights movement against Jim Crow segregation. In many “first wave” programs, college recruiters targeted outreach to predominantly minority high schools in nearby urban neighborhoods. These programs also permitted slightly more flexible evaluations of academic merit than previous admissions policies. Chen notes that the design of and rationale for race-conscious affirmative action programs have changed significantly since their earliest days, but he argues that learning about the establishment and operation of “first wave” programs still has policy relevance today.

Race, Interracial Relations, and Prejudice

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 that interracial contact is a stressful experience for all races. In work with Northwestern psychologist Daniel Molden and other colleagues, including graduate students, Richeson is setting out a model for how such interracial interactions can be made smoother and less stressful 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 inherent in the others. 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.

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, Richeson examines how white Americans react to information about the impending population changes. In a series of experiments, they find consistent evidence that exposure to information about shifting U.S. racial demographics evokes the expression of more implicit and explicit racial bias and greater endorsement of political conservatism. These are mediated 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.

Creating a New Racial Order

The American racial order—the beliefs, institutions, and practices that organize relationships among the nation’s races and ethnicities—is undergoing its greatest transformation since the 1960s. Co-authored with Jennifer Hochschild of Harvard University and Vesla Weaver of Yale University, political scientist and IPR associate Traci Burch’s 2012 book, Creating a New Racial Order: How Immigration, Multiracialism, Genomics, and the Young Can Remake Race in America (Princeton University Press), looks at the reasons behind this dramatic change, and considers how different groups of Americans are being affected. The authors outline the components of racial order, also examining mechanisms such as  immigration, multiracialism, genomic science, and generational change. They argue that young adults understand and practice race differently from their elders, with their formative memories being 9/11, Hurricane Katrina, and Obama’s election, rather than civil rights marches, riots, or the early stages of immigration. Their personal and political choices will be critical to how, and how much, racial hierarchy is redefined in decades to come.