This repository contains scripts for three projects studying different facets of economic inequality:
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Perception Bias: explore to what extent people associate rising economic inequality with an increase in poverty (vs. affluence)
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Digital Discrimination in Sharing Economy: examine how economic inequality in one's region affects their access to peer-to-peer services
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Education Decisions: investigate how economic inequality in one's region affects their decision-making regarding higher education, including college decision (whether or not to attend college) and choice of major (which field to major in).
Data are available upon request as the manuscripts are under review. If you request additional information, please contact me @ [email protected].
When People Talk About Income Inequality, What Are They Talking About? The Lay Understanding of Income Inequality
While prior research extensively examines how people perceive the level of inequality, little has been known about what inequality means to them.
A survey with a national representative sample, an controlled experiment and an implicit association test (IAT) provided convergent evidence that people associate income inequality more with poverty than with affluence. This constitutes a new form of misperception of income inequality as, in reality, rising income inequality is more associated with an increase in the number of wealthy households rather than households living in poverty.
These findings may help policymakers resolve the paradox between people's perception of unfair income distribution and their resistance to redistribution and promote public support for wealth-equalization interventions by correcting this biased lay understanding.
In addition, we speculate that availability heuristics (Tversky & Kahneman, 1974) (e.g., poverty is more salient, concrete, and recallable) and the negative halo effect (Cook et al., 2003) (e.g., societies with higher income inequality are more likely to experience more socioeconomic issues including poverty) account for the development of this lay association.
This research explores how economic inequality in a consumer's region affects their access to peer-to-peer (P2P) services.
Leveraging transactional, survey, and experimental data across diverse types of P2P services, including lending, accommodation, and tool-sharing, we find convergent evidence that increased economic inequality in a consumer’s region—encompassing state, country, and local community—reduces providers’ willingness to offer P2P services to them. This, in turn, results in diminished access to P2P services for these consumers. A serial mediation analysis reveals that this is because providers perceive consumers from more unequal regions as less trustworthy, thus perceiving heightened financial risks associated with serving them.
These findings document a new form of digital discrimination: other than individual characteristics, such as race, gender and age (Cheng & Foley, 2018; Cui et al., 2020; Edelman et al., 2017; Farmaki & Kladou, 2020; Ge et al., 2020; Pope & Sydnor, 2011; Ravenelle, 2016), the socioeconomic environment of consumers’ region, including factors like regional economic inequality, can result in less favorable treatment and pose barriers to their access to P2P services.
These findings thus underscore the needs for further efforts to be undertaken to combat digital discrimination in P2P services. A viable alternative, suggested by our findings, is to implement a similarity-based matching algorithm. Rather than relying solely on preference features and booking history (Guo et al., 2018), the algorithm can also integrate self-disclosed information from both providers and users as an additional feature to calculate the similarity score and facilitate matching. It may be aslo beneficial to explicitly display the similarity score to providers when they receive service inquires or requests. This display can increase the salience of interpersonal similarities between themselves and the potential consumer, diverting their attention from other bias-susceptible characteristics of the consumer.
We investigate how economic inequality in one’s society shapes their education decisions. Leveraging state-level Google Search data, county-level Census data, and individual-level experimental data, we find that as economic inequality rises, individuals become more willing to pursue a college education because they perceive a wider income gap between well-educated individuals and those with lower levels of education (i.e., heightened perceived education premium of college ).
Besides college decision, economic inequality also influences individuals' choice of major for a similar reason. In a society characterized by greater economic inequality, individuals' gravitate towards majors that promise higher earning potential, even if these fields do not align closely with their personal interests. This shift towards prioritizing extrinsic motivations over intrinsic ones is driven by their perception of a greater wage difference between higher- and lower-paying majors (i.e., heightened perceived education premium between majors)
These findings provide policy implications for several pressing challenges in higher education. Rising economic inequality may contribute to the escalation of students’ debts under two mechanisms. First, it motivates young people to purse college without adequately considering their financial situation. Simultaneously, it enhances the perceived education premium of college, potentially leading young people to be overly optimistic about their capacity to repay debts. In addition, it may be related to humanities major crisis (e.g., Heller, 2023; Schmidt 2018), manifested in a sharp decline in humanities major enrollments in the past half decade and people’s remorse of studying humanities (Van Dam, 2022). Since humanities majors are commonly associated with lower salaries compared to other majors, young people tend to be more hesitant to invest four years in humanities, even if they harbor a greater interest in or aptitude for these disciplines. Forsaking genuine passions in favor of majors promising higher earnings can be myopic and detrimental for young people:they may struggle with their academic performance as their inherent aptitude might not align with fields offering greater pays (Altonji et al. 2015) and experience lower job satisfaction by pursuing a career path for which individuals lack intrinsic motivation (Wernimont 1966).
To address these challenges, it is crucial to nudge young people to take into account various factors. This involves considering their actual needs, genuine interests, career paths, and financial capabilities, rather than being excessively influenced by the perceived education premium of college, which may be exaggerated by economic inequality in their minds. To counteract the retreat from humanities, efforts should be directed towards creating equitable job prospects for individuals with humanities backgrounds . It is necessary to boost the perceived education premium of humanities majors by emphasizing the value of versatile, transferable, and adaptable skills acquired through studying humanities, showcasing how these skills can translate into financial benefits across various professions.
- Altonji, J. G., Arcidiacono, P., & Maurel, A. (2015). The Analysis of Field choice in college and Graduate School: Determinants and wage effects.
- Cheng, M., & Foley, C. (2018). The sharing economy and digital discrimination: The case of Airbnb. International Journal of Hospitality Management, 70, 95–98.
- Cook, G. I., Marsh, R. L., & Hicks, J. L. (2003). Halo and devil effects demonstrate valenced-based influences on source-monitoring decisions. Consciousness and Cognition: An International Journal, 12(2), 257–278.
- Cui, R., Li, J., & Zhang, D. (2020). Reducing Discrimination with Reviews in the Sharing Economy: Evidence from Field Experiments on Airbnb. Management Science, 66(3), 1071–1094.
- Edelman, B., Luca, M., & Svirsky, D. (2017). Racial discrimination in the sharing economy: Evidence from a field experiment. American Economic Journal: Applied Economics, 9(2), 1–22.
- Farmaki, A., & Kladou, S. (2020). Why do Airbnb hosts discriminate? Examining the sources and manifestations of discrimination in host practice. Journal of Hospitality and Tourism Management, 42, 181–189.
- Ge, Y., Knittel, C. R., MacKenzie, D., & Zoepf, S. (2020). Racial discrimination in transportation network companies. Journal of Public Economics, 190, 104205.
- Guo, L., Li, J., Wu, J., Chang, W., & Wu, J. (2018). A novel Airbnb matching scheme in shared economy using confidence and prediction uncertainty analysis. IEEE Access, 6, 10320–10331.
- Heller, N. (2023), “The end of the English major”, The New Yorker, Retrieved from https://www.newyorker.com/magazine/2023/03/06/the-end-of-the-english-major.
- Pope, D. G., & Sydnor, J. R. (2011). Implementing Anti-Discrimination policies in statistical profiling models. American Economic Journal: Economic Policy, 3(3), 206–231.
- Ravenelle, A. (2016), “Belong anywhere? How Airbnb is dismantling generations of civil rights in the name of progress,” SSRN, Working Paper, Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2838219.
- Schmidt, B. (2018), “The humanities are in crisis,” The Atlantic, Retrieved from https://www.theatlantic.com/ideas/archive/2018/08/the-humanities-face-a-crisisof- confidence/567565/.
- Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131.
- Van Dam, A. (2022), “The most-regretted (and lowest-paying) college majors,” The Washington Post, Retrieved from https://www.washingtonpost.com/business/2022/09/02/college-major-regrets/.
- Wernimont, P. F. (1966). Intrinsic and extrinsic factors in job satisfaction. Journal of Applied Psychology, 50(1), 41–50.
- Jinyan Xiang as the first author, script, and repo creator.
- Dr. Mario Pandelaere as the advisor and co-author.
