DSOC 2090 1st EditionExam # 2 Study Guide Lecture 7 (2/23) Trends in Economic Inequality Why is income inequality rising, especially in the US? Explanation 1: Immigration- raises supply of labor- native born labor is substitutable- raises aggregate demand and safety net costs- but this isn’t enough to explain the top income inequalityExplanation 2: Skill biased technological change- dominant economic account and a changing demand for skills- rising expectations for education- wages for college degree holders has stagnated in the last 10 years- but why have wages and productivity diverged? - Is income growth/inequality really due to changes in technology?Explanation 3: Class biased institutional changes- rent: payments to an asset above and beyond patent that is necessary to keep that asset in production under perfect competition. Sources include barriers that restrict supply of labor and inequality due to market failure- labor rents: wages in excess of what workers would accept (reservation wage-minimum wage a worker would accept in order to stay in labor market instead of relaxing) in a fullycompetitive market- bottom end rents bring up the wages of lower skilled and increase inequality, top end rents do the oppositeSummary:- class biased institutional change: decline of bottom end rent institutions and increase of top end rent institutions, decline in unionization, declining real value in minimum wageInstitutional sources of top end rent1)educational credentialing: an increase to returns 2)occupation rents3)managerial rent/CEO pay4)capital rentLecture 8 (2/26)How does income inequality in the US compare to other advanced industrialized nations? Why do we see cross national variations in inequality levels? - The US has high income inequality before and after taxes- Comparatively higher top end incomes and lower bottom end incomes- Steeper growth in inequality- Sources of US exceptionalismo Productivity, we have a high GDP and there are signs of correlation between inequality and GDP. But this doesn’t always mean productivityo Unemployment/inequality tradeoff? Krugman hypothesis: countries that are willing to have low bottom wages have more inequality and this means employers hire more workers and a lower unemployment rate.o Unionization rates and proworker vs pro business policy o Taxation and redistribution policies: you give things to poor peopleo Norms and institutions surrounding executive pay- Welfare regimes: 3 basic types of industrialized industrieso Liberal welfare regimeso Corporatist welfare regimeso Social democratic welfare regimesLecture 9 (3/3) Social MobilityAttainment process: who gets ahead and why?Factors that affect attainment?- family background- education and aspirations- neighborhoods- social capital and networks2 ways of measuring mobility:- absolute mobility: percent of people moving into or out of class of origin. Affected by thesupply of kids from each class. This is a poor measure for comparing over time across countries.- relative mobility / social fluidity: measures relative advantage of being born in one class over another. It is unaffected by class differences in dad’s generationsLecture 10 (3/5)To what extent is the US the land of opportunity?- Hypothesis 1: American exceptionalism: America is the land of opportunity- Hypothesis 2: cross national convergence: actual chances of moving up and down are relatively same in all countries that reach a certain level of development- Hypothesis 3: inverse relationship between income inequality and social fluidityLecture 12 (3/10)Does the income section you were born in affect where you are later in life? How much of the association between origin and destination can be “explained” by education? How do expectations that others hold for you, and your own aspirations affect your attainment?- How much education you get matters for the occupation you have in the future- Possible sources of education destination association: human capital, social capital, cultural capital- Blau/Duncan attainment model: educational and occupational attainment affected by family background. Most of intergenerational transmission of occupational prestige is through son’s educational attainment. Teaches us that strong family background affects educational attainment, and open access policies do little to equalize opportunity. Lecture 13 (3/12)Why is it that low social economic status parents expect their kids will get less education?- Hypothesis #1: low ses parents and peers don’t value education as much as high ses parents and peers- Hypothesis #2: low ses parents and peers value education but adjust expectations to correspond to reality Do aspirations affect attainment?- Principle of self determination: only obstacles to attainment is assuming that opportunities are limited- Myth of self determination: just world phenomenon is the belief that people get what they deserve, self serving bias is where they attribute success to internal