The Effect of Political Power on Labor Market Inequality: Evidence from the 1965 Voting Rights Act

Carlos Avenancio-Leon (Indiana University-Bloomington)
Abhay Aneja (UC Berkeley)

Abstract : A central concern for racial and ethnic minorities is having an equal opportunity to advance group interests via the political process. There remains limited empirical evidence, however, whether democratic policies designed to foster political equality are connected causally to social and economic equality. In this paper, we examine whether and how the expansion of minority voting rights contributes to advances in minorities’ economic interests. Specifically, we consider how the political re-enfranchisement stemming from the passage of the 1965 Voting Rights Act (VRA) contributed to improvements in the relative economic status of black men during the 1960s and 1970s. Using spatial and temporal variation in federal enforcement of the VRA, we document that counties where voting rights were more strongly protected experienced larger reductions in the black-white wage gap between 1950 and 1980. Our analysis of mechanisms suggests that minority political influence improved blacks’ relative position through increased public employment, fiscal redistribution, as well as through implementation and enforcement of group-favoring labor market policies, such as affirmative action and anti-discrimination laws.

Intergenerational Mobility in China Across Space and Time

Yining Geng (University of Liverpool)

Abstract : Inequality is an important issue in many countries, and intergenerational mobility is one of the key mechanisms for alleviating inequality. What drives mobility? Why do some areas generate higher rates of mobility than others? This paper has two objectives. First, using individual data from censuses and surveys, I characterize the features of intergenerational mobility in China based on education and occupation for cohorts from 1949 to 1977. Second, I empirically investigate how intergeneration-transmitted aspirations can contribute to the emergence and persistence of social mobility. I report several findings. First, I show that there are substantial geographic variations in education- and occupation-based intergeneration mobility across prefectures in China. Second, I empirically examine the role of aspiration in explaining contemporary social mobility. Using the plausibly exogenous success rate for the bureaucrat selection examination (Keju) in ancient China as a proxy for historical aspirations and taking advantage of the extensive changes in prefecture boundaries since the founding of the People's Republic of China (PRC) in 1949, I find that aspirations increase upward mobility, and the effect happens to individuals in the low-to-middle quintiles in the education distribution. Third, using the victims of the anti-intellectual movement (the Cultural Revolution) in the 1970s as a proxy for the perceived drop in return to education, I show that return to education had a positive impact on determining upward mobility. Finally, I nd that in environments with more aspiration, individuals' upward mobility is more responsive to changes in the perceived return to education.

An Economic Theory of Differential Treatment

Emil Temnyalov (University of Technology Sydney)

Abstract : When are differential treatment policies—such as preferential treatment in school choice, affirmative action in university admissions, and gender equity policies in labor markets and in promotions within organizations—justified by efficiency concerns? This paper proposes an assignment model of differential treatment, where a policymaker assigns agents to different treatments or positions in order to maximize total surplus, based on the agents’ characteristics and on noisy information about their types (i.e. abilities or productivities). I provide necessary and sufficient conditions on the agents’ signaling structures which characterize whether surplus maximization requires differential treatment or not, in a general non-parametric information framework. I show that under reasonable conditions the optimal assignment policy is characterized by an index which measures the agents’ expected marginal benefits from different treatments, and also examine further conditions on the bias and informativeness of signaling structures that determine the efficiency implications of differential treatment. I examine applications of this model to inequality, decentralization, and organizational design. The model also provides novel questions and predictions for empirical research on the economics of discrimination.

Women’s Promotions and Intra-household Bargaining: Evidence from Bangladesh

Hannah I. Uckat (University of Oxford)

Abstract : This paper investigates how women’s promotions in the workplace affect bargaining in the household. I exploit the design of a promotion programme for women in 27 Bangladeshi garment factories, by comparing women who were quasi-randomly selected for the programme to the shortlisted runners-up. Results using three different estimation approaches (OLS with post-double selection Lasso, regression discontinuity, and matching) show that women’s bargaining power increases as a result of the promotion. The effects are largest for the share of income households spend on assignable goods for women (especially clothing and accessories) and remittances. The latter appears to mask expenditures on children, since remittances increase most for women whose children live with other relatives. I find that these direct effects of the promotions are amplified by impacts on women working as subordinates of the new female managers. Using the quasi-random assignment of sewing-line operators to production lines for identification, I observe that women exposed to a female manager have more say in decision-making in the household, especially about their own mobility. Overall, I find suggestive evidence that both the direct and the indirect impacts are driven by women gaining confidence to get involved in bargaining, rather than income effects that ease the budget constraint or changes in the relative wage in the household.