Category: Data Source

There are pronounced racial, ethnic, and gender gaps in income in the U.S. We investigate whether these correspond with differences in competitiveness, risk tolerance, and confidence relative to performance in a large, stratified sample of the U.S. prime-age population. We find substantial differences in all three traits across Black, Hispanic, and White males and females. These traits predict individual income. Competitiveness and risk tolerance help explain the White gender income gap. Competitiveness also affects the Black-White income gap between men. Confidence about one’s performance helps explain a substantial and significant portion of all five race-gender income gaps with White men.

That is from a new paper by Aurélie Dariel, John Ham, Nikos Nikiforakis, and Jan Stoop.  The number of data points is 2,463.  Here is one sentence from the paper:

The sizes of the effects are substantial: individuals above the median in terms of competitiveness and risk tolerance,
for instance, have incomes that are 21.2% and 15.7% higher than those below the median, respectively, when jointly estimated. Confidence in relative performance is also associated with income: individuals in the upper and lower third of the distribution (the upper third being overconfident and the lower third being underconfident) have incomes that are 23.5% and 16.7% lower than the middle third, who are better at evaluating their relative performance.

And this:

We find that controlling for confidence substantially and significantly reduces the unexplained income gaps between White men and all of our other five REG groups; the effects range from 7.2% of the differential (White women versus White men) to 18.7% (Hispanic men versus White men). Only controlling for competitiveness significantly reduces the unexplained income gap between White women and White men by 5.9%, but increases the unexplained income gap between Black men and White men by 5.1%. Only controlling for risk tolerance, on the other hand, does not significantly affect any of the income gaps, with the exception of a (marginally) significant reduction of 4.1% in the gap between White women and White men. Jointly controlling for the three traits significantly reduces the unexplained income gap between Black women and White men (by 15.2%), Hispanic women and White men (by 11.5%), and White women and White men (by 15.0%). However, these traits do not explain the gap between Black men and White men, as the overconfidence and competitiveness effects go in opposite directions.

All worthy of a ponder.  I did find this result of particular interest:

On average, Blacks and Hispanics are 9.7% more competitive than Whites.

You will note this is based on self-reports.  While self-reports often are more reliable than outsiders might think, are they so reliable for making comparisons across different groups in this manner?  And the variable “confidence in relative performance” — might that be a proxy for other, unobserved but also quite real factors?

Via a loyal MR reader, and I commend the researchers for their courage, even if I am not convinced by everything they have done.

The full paper title is “Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans,” by Kevin Corrinth and Jeff Larrimore.  Here is the abstract:

We find that each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement. At age 36–40, Millennials had a real median household income that was 18 percent higher than that of the previous generation at the same age. This rate of intergenerational progress was slower than that experienced by the Silent Generation (34 percent) and Baby Boomers (27 percent), but similar to that experienced by Generation X (16 percent). Slower progress for Generation X and Millennials is due to their stalled growth in work hours—holding work hours constant, they experienced a greater intergenerational increase in real market income than Baby Boomers. Intergenerational progress for Millennials under age 30 has remained robust as well, although their income growth largely results from higher reliance on their parents. We also find that the higher educational costs incurred by younger generations is far outweighed by their lifetime income gains.

The emphasis added is from me, not from the authors.  Via the excellent Kevin Lewis.

We investigate how the gender gap in confidence affects the views that evaluators (e.g., employers) hold about men and women. We find the confidence gap is contagious, causing evaluators to form overly pessimistic beliefs about women. This result arises even though the confidence gap is expected and even though the confidence gap shouldn’t be contagious if evaluators are Bayesian. Only an intervention that facilitates Bayesian updating proves (somewhat) effective. Additional results highlight how similar findings follow even when there is no room for discriminatory motives or differences in priors because evaluators are asked about arbitrary, rather than gender-specific, groups.

That is a new piece by Christine L. Exley and Kirby Nielsen in the new March 2024 AER.