College of Behavioral & Social Sciences
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Item WARRIORS, GUARDIANS, WOLVES, AND SHEEP: OFFICER PERCEPTIONS OF POLICE-CIVILIAN IDENTITIES AND THE PERSISTENCE OF ORGANIZED INEQUITY(2024) Powelson, Connor Reed; Ray, Rashawn; Sociology; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Despite nearly a decade of community engagement and police reform efforts guided by the Warrior/Guardian paradigm, there remains little evidence of police culture change and rates of racially disproportionate police misconduct remain a social problem. In this work, I bring officers into this conversation and leverage the Warrior/Guardian paradigm as a starting point for an exploration of how identity structures constitute police organizational culture and practice, its consequences, and its potential for change. The present work contributes to the public and scholarly discourse on police culture and the role of identity processes in the reproduction of organizational practices. I characterize police culture as a set of identity schemas that connect people, practices, and social resources. I chart three domains of symbolic interaction that characterize the intersection of police structure, police culture, and public culture and account for police organizational rules and practices that distribute law enforcement outcomes and pattern organized inequity.Item ESSAYS ON MONETARY POLICY AND HOUSEHOLD INEQUALITY(2021) Lee, Donggyu; Aruoba, Boragan; Stevens, Luminita; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)A central question in monetary economics is how changes in monetary policy affect economic activity. Three major changes in the U.S. economy are currently reshaping the academic debate surrounding this classic question. First, inequality in the United States has risen significantly in recent decades. Second, the Great Recession and the recent pandemic crisis pushed the nominal policy rate to effective lower bound (ELB), and consequently, the Federal Reserve resorted to unconventional monetary policies, such as quantitative easing (QE). Third, a secular decline has pushed real interest rates to levels close to zero, and in response, academia proposed an increase in the inflation target. Each of these developments motivates a chapter of my dissertation. The first chapter of my dissertation develops a state-of-the-art heterogeneous agent monetary model and studies the transmission mechanisms and the distributional consequences of conventional monetary policy. Compared to the existing models in the literature, the model exhibits the responses of real wages and profits to monetary policy shocks that are consistent with the existing empirical evidence. With the model parameterized to match the distribution of wealth and income in the United States, I first examine how an unexpected decrease in the nominal interest rate leads to an increase in aggregate consumption. My analysis shows that most of the consumption response is due to general equilibrium income effects rather than inter-temporal substitution, consistent with the existing results in the literature. However, when wages are rigid and profits are procyclical, as in the data, consumption responses are stronger at both ends of the wealth distribution, unlike in the standard model with flexible wages. Importantly, an expansionary monetary policy shock can increase inequality by inducing higher profits and equity prices, though it benefits households at the bottom significantly by reducing unemployment risks, as opposed to the existing results in the literature. This second chapter studies how quantitative easing (QE) affects household welfare across the wealth distribution. To this end, the model developed in the first chapter is extended to feature frictional financial intermediation, an effective lower bound (ELB) on the policy rate, forward guidance, and QE. Moreover, to quantify the contribution of the various channels through which monetary policy affects inequality, I estimate the model using Bayesian methods, explicitly taking into account the occasionally binding ELB constraint and the QE operations undertaken by the Federal Reserve during the 2009-2015 period. I find that QE program unambiguously benefited all households by stimulating economic activity. However, it had non-linear distributional effects. On the one hand, it widened the income and consumption gap between the top 10\% and the rest of the wealth distribution, by boosting profits and equity prices. On the other hand, QE shrank inequality within the lower 90\% of the wealth distribution, primarily by lowering unemployment. On net, it reduced overall wealth and income inequality, as measured by the Gini index. Surprisingly, QE has weaker distributional consequences compared with conventional monetary policy. Lastly, forward guidance and an extended period of zero policy rates amplified both the aggregate and the distributional effects of QE. The third chapter of my dissertation investigates the aggregate and the distributional consequences of raising the inflation target from 2\% to 4\% using the model developed and estimated in the second chapter. I find that, during the transition towards the 4\% inflation target, the economy experiences substantial expansion because of the forward-looking Phillips curve and the Taylor rule that features a significant degree of interest rate smoothing. Also, the transition reduces the overall degree of inequality by lowering the unemployment rate and the real interest rate though it leaves bigger welfare gains for the top than for the middle. During the simulation around the new steady-state with the 4\% inflation target, both frequency and duration of the ELB episodes are lower. Importantly, the average unemployment rate and its standard deviation are significantly lower with the higher inflation target, which leads to higher aggregate demand and lower overall inequality on average.Item Income Inequality and Caste in India: Evidence from India Human Development Surveys(2021) Joshi, Omkar; Vanneman, Reeve D; Sociology; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The problem of income inequality has become a defining problem in today’s world yet, the implications of overall income inequality for different social groups remain understudied. The sociological literature on stratification has treated these two important facets of inequality, namely overall income inequality and group income gaps, separately. I study these two problems together in this dissertation by examining overall income inequality and caste and religious groups in the context of Indian society. Using the nationally representative data from India Human Development Surveys, I first examine in detail, overall income and consumption changes and inequality from 2004-05 to 2011-12. Then, I look at changes in income and consumption for different caste and religious groups and study inequality changes between these groups. In the end, I evaluate the role played by educational expansion and returns to education in explaining changes in overall income inequality as well as group income gaps using OLS and Quintile regression models.I find that income inequality based on both income as well as consumption measures has increased in India between 2004-05 and 2011-12. But contrary to the global pattern of increasing income inequality, income inequality in India was driven not just because of high growth for households at the top, but more so due to low growth of incomes for households at the bottom of the income distribution. Despite this rise in overall income inequality, income gaps and inequality between the forward caste and disadvantaged caste groups are getting closed. Though caste disadvantage is operational at all parts of income distribution, it becomes less oppressive over time. I find that while education helps explain the declining between-caste income inequality, it does not satisfactorily answer why overall income inequality is growing. I also find that socially disadvantaged groups as well as low educational households who are concentrated disproportionately at lower incomes did better in terms of their income growth over time. Yet, the low-income households as a whole somehow did not grow much over time. These opposite trends among lower income households, is a puzzling result.Item Top Income Inequality, Aggregate Saving and the Gains from Trade(2015) Tang, Lixin; Limao, Nuno; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Canonical studies of trade liberalization focus on its effects on aggregate income and on the distribution of income. The interaction between these two effects of trade liberalization has been less studied. In this dissertation, I study this interaction. More precisely, I study the relationship between international trade and income inequality, with a focus on the implications for aggregate saving and the gains from trade. I argue that accounting for the effects of international trade on income inequality among entrepreneurs can imply higher gains from trade for workers. In the second chapter, I construct a dynamic model of international trade with incomplete markets. In the model, entrepreneurs face uninsurable idiosyncratic productivity risk, and thus save. Since the most productive entrepreneurs have the highest saving rate and are the ones that export, a reduction in trade costs increases their share of total profits and their savings, which leads to a large increase in the aggregate supply of capital and increased capital accumulation. I calibrate the model using US data and examine the effects of international trade on aggregate output, the consumption of workers, and the consumption of entrepreneurs with heterogeneous productivity. In the model, international trade increases aggregate output by 2.5% and the wage of workers by 3.4%. On the other hand, while the aggregate consumption of entrepreneurs is unchanged by international trade, the increase in inequality of profits among entrepreneurs implies that the certainty-equivalent consumption of a typical entrepreneur actually decreases by 4.0%. Capital accumulation plays an important role in the model, accounting for 51.9% of the output gains from trade. To isolate the effects of the proposed mechanism, I construct a benchmark model with complete markets, in which firms with heterogeneous productivity are owned by a single entrepreneur. In this complete markets benchmark, the increase in aggregate output due to international trade is 1.8% while the increase in the wage of workers from trade is 2.7%. Therefore, the novel mechanism in my model increases the wage gains for workers by 25.9%, and the gains in aggregate output by 38.9%, compared to the complete markets benchmark. In the third chapter, I test the key predictions of the model using country-level data. Using fixed-effects (FE) regressions in a large panel of countries, I find a significant and positive correlation between trade openness and the aggregate saving rate. I find a much weaker relationship between trade openness and the investment rate. Furthermore, I show that greater trade openness has a stronger effect on the aggregate saving rate in a country where the initial top 10% share of total income (before any changes in trade openness) is higher. This is in line with my model where the increase in the aggregate saving is driven by top income earners. Additionally, I build on the gravity-based instrumental-variable (IV) approach pioneered by Frankel and Romer (1999) and extend it to a panel setting. I find a larger effect of trade openness on the aggregate saving rate in the fixed-effects panel regressions with IV than without IV. The results provide strong evidence that a supply-side channel of increased capital accumulation is operative following an increase in trade openness. In the fourth chapter, I study the relationship between the household saving rate and openness in China through the lens of the framework outlined in the second chapter. I show that there has been a large increase in top income shares both among entrepreneurs and workers over the past 30 years in China. Additionally, there is a very significant and positive correlation between top income shares and the household saving rate across Chinese counties. Using the setting of the 1992 liberalization episode, I find that provinces with a greater increase in openness experienced a larger increase in the household saving rate during the period. Taken together, the evidence is supportive of the hypothesis that greater openness increases the household saving rate in China, by increasing the share of total income received by the highest-income households who also have the highest saving rate.Item Essays on Transatlantic Differences in Taxation, Redistribution and Provision of Public Goods(2013) Torul, Orhan; Drazen, Allan; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation investigates differences between the U.S. and Europe in the levels of taxation, redistribution, provision of public goods, and perception of fairness in income inequality. The first chapter concentrates on the differences between the U.S. and Scandinavia in higher education, and asks how it is possible that the U.S. has considerably more unequal higher educational attainment, higher reliance on private education and lower taxes than Nordic Europe, given similar political institutions. To address this question, I develop a parsimonious overlapping generations model in which agents can choose between public and private education. I first show that for a given tax rate difference of 7 percent, the model can deliver the observed educational Transatlantic differences, without having to rely on cross-country differences in preferences, parameters or other unorthodox elements. Next, I show the model can provide insight into how either the U.S. or the Nordic tax regimes could receive political consent. My explanation is due to the fact that per-capita output and other macroeconomic variables are U-shaped in taxes, both in the model and in the cross-country data. The economic intuition behind this finding is that while at low tax rates an increase in taxes and public education provision dampen human capital accumulation due to marked drops in private education attainment, at high tax rates public education provision gets sufficiently large that a majority of the population prefers public over private education, and further increases in taxes boost public education attainment more than they reduce private one. The second chapter incorporates the Transatlantic differences in perceptions into the picture and asks how the fact that a majority of Europeans believe income differences are primarily due to luck while a majority of Americans attribute such differences to the role of effort and skill reconciles with Transatlantic macroeconomic differences. I extend the model from the first chapter to include two sources of individual income differences: an inborn competence shock which affects labor supply choice and education decisions, and a luck shock on income, which is orthogonal to decision rules and inborn abilities. I find that low taxes coupled with low public education provision, as in the U.S. case, induce a large impact of inborn competence on schooling and labor supply, which in turn implies that a large share of the U.S. income differences are due to skill, education and effort. By contrast, a combination of high taxes and high public education, as in Europe, minimizes total income inequality and differences due to effort and inborn competence, and magnifies the impact of luck on inequality, in accordance with the existing beliefs. I also show that the U-shaped behavior of macro variables and welfare gains in taxes, as documented in the first chapter, carries over to this model, thereby providing insight into the political sustainability of macroeconomic variables and perceptions.Item Essays in Labor and Political Economics(2011) Tuzemen, Didem; Haltiwanger, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation consists of three chapters. The first chapter provides an overview of the dissertation by summarizing the two papers presented in the following chapters. The paper in the second chapter contributes to the labor-macro literature. More specifically, I develop a general equilibrium model with labor market search and matching frictions, endogenous labor force participation and on-the-job search, which can replicate the labor market dynamics observed in the U.S. data. Most existing real business cycle models with labor market frictions assume that all agents in the economy are part of the labor force, therefore these models allow for only two possible labor market states: employment and unemployment. This is a highly problematic and unrealistic assumption. Studies that extend the basic model by incorporating being out of the labor force as a third state, through allowing for a work-home production (or leisure) decision, find that the model generates counterfactual business cycle statistics: labor force participation is very volatile, while unemployment is weakly procyclical or acyclical, and has a high positive correlation with vacancies. The failure of this three-state model to replicate the labor market dynamics observed in the U.S. data is mainly due to the excessive responsiveness of labor force participation to labor market conditions determined by aggregate shocks to productivity. In order to dampen the movements along the labor market participation margin in the simple three-state model, I introduce an on-the-job search mechanism that serves as a second margin along which the household's labor market adjustments can take place. The proposed model successfully generates countercyclical unemployment and the Beveridge Curve relationship between unemployment and vacancies. Additionally, the business cycle statistics reproduced by the modified model are quantitatively more in line with their empirical counterparts. The third chapter presents a joint study with Mauricio Cardenas. We analyze the determinants of the government's decision to invest in fiscal state capacity, which refers to the state's power to raise tax revenue. Using a model we highlight some political and economic dimensions of this decision, and conclude that political stability, democracy, income inequality, as well as the valuation of public goods relative to private goods, are all important variables to consider. We then test the main predictions of the model using cross-country data and find that fiscal state capacity is higher in more stable and equal societies, both in economic and political terms, and in countries where the chances of fighting an external war are high, which is a proxy for the value of public goods.Item THREE ESSAYS IN POLITICAL ECONOMY(2010) Miller, Sebastian Jose; Drazen, Allan; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation explores three different relevant questions in political economy. Chapter 1 is devoted to understanding why populist-outsider candidates get elected, and what conditions may favor/hinder their electability. The results show that countries with a higher income and wealth concentration are more likely to elect populist outsiders than countries where income and wealth are more equally distributed. It is also shown that elections with a runoff also are less likely to bring these populist outsiders into office. Chapter 2 in turn explores the role of the middle class in moderating political outcome in a framework where money and votes play two distinctive roles in the election process. In this chapter, a three-class model of heterogeneous agents is developed in which groups affect policy outcomes through their voting behavior and contributions to political campaigns, and where income inequality can lead to extreme policy outcomes. Increasing the size of the middle class reduces the likelihood of extreme policy outcomes, as does a richer middle class. This result highlights the importance of a large and strong middle class for political stability. Finally Chapter 3 looks at the question of why inequality has remained persistently high in Chile despite its success in reducing poverty and achieving high growth for two decades while having a mostly pro-poor structure of public expenditures. We show that the key factors explaining this persistent inequality have been a low level of fiscal expenditures caused by low tax revenues that have not permitted enough public investment in human capital and R&D.Item UNAFFORDABLE OUTCOMES: THE WEALTH GAP, BLACK POLITICAL PARTICIPATION AND PUBLIC POLICY OUTCOMES IN THE BLACK INTERESTS(2009) Whitt, Christopher Matthew; Morris, Irwin; Government and Politics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This study investigates whether, and if so, how the racial wealth gap in the United States influences political participation and public policy proposals and outcomes in the interests of Blacks. There are many factors attributed to failures and successes in the representation of Black interests in the public policy arena. This project focuses on one prominent factor: the influence of economic disparities on political participation and thus, public policy decisions made by the members of Congress representing these populations. Using Census data and other data on campaign contributions and voting, two forms of political participation will be featured and placed into: voting and campaign contributions. This dissertation will bridge some of the gaps among various areas of social science pertaining to the study of wealth, participation and public policy formulation. Building these bridges is a substantial goal in this dissertation. Many of the approaches used will also serve to reach across divides within political science. Techniques common in American Politics, Comparative Politics and even Political Theory will be used. Correlations, various hypotheses tests, case studies, interviews and extensive literature reviews will be keys to success in this project. The first part of the research will focus on the existence of the racial wealth gap. The second part will show how the wealth gap influences political participation in the form of voting and contributing to campaigns. The third part will draw connections between political participation and public policy outcomes. Overall, this project should paint a clearer picture of how the possession of or lack of wealth can help or hinder the political power of a selected group.Item The Effect of Age Structure on US Income Inequality, 1976 to 2007(2008) Albrecht, Scott; Iceland, John; Sociology; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This paper examines the relationship between age structure and income inequality. As a cohort ages, incomes become more unequally distributed within it. Consequently, as the age structure of a population evolves, it may have real effects on the aggregate distribution of incomes in that population. Using March CPS data from 1976 to 2007, I decompose inequality change by age and education. Changes in the age structure have had a net negative impact on inequality since 1976. The aging of the large baby boom cohort has been offset by the aging of the relatively small birth dearth cohort and by trends in mean income by age. I also find some evidence that inequality patterns by education are influenced by the age structure of education groups.