Essays on economic inequality and mobility

Reichardt, Hugo (2024) Essays on economic inequality and mobility. PhD thesis, London School of Economics and Political Science.

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Abstract

This dissertation studies three key drivers of economic inequality and mobility. Chapter I shows that scale bias, the extent to which technical change increases the productivity of large relative to small firms, is important for inequality. I develop a tractable framework where people choose to work for wages or earn profits as entrepreneurs and where entrepreneurs choose from a set of available production technologies that differ in their fixed and marginal cost. Large-scale-biased technical change lowers entrepreneurship rates and increases top income inequality, primarily by concentrating business income. Small-scale-biased technical change does the opposite. I show the empirical relevance of scale bias by identifying the causal effects of adoption of two general purpose technologies that vary in scale bias, but are otherwise similar: steam engines (large-scale-biased) and electric motors (small-scale-biased). Using newly collected data from the United States and the Netherlands and a range of identification strategies, I show that these two technologies had the effects predicted by the theory: steam engines increased firm sizes and inequality, while electric motors decreased both. In Chapter II, we study the long-run effects of slavery and restrictive Jim Crow institutions on Black Americans’ economic outcomes. We track individual-level census records of each Black family from 1850 to 1940, and extend our analysis to neighborhood- level outcomes in 2000 and surname-based outcomes in 2023. We show that Black families whose ancestors were enslaved until the Civil War have considerably lower education, income, and wealth than Black families whose ancestors were free before the CivilWar. The disparities between the two groups have persisted, not because of slavery per se, but because most families enslaved until the Civil War lived in states with strict Jim Crow regimes after slavery ended. In a regression discontinuity design based on ancestors’ enslavement locations, we show that Jim Crow institutions sharply reduced Black families’ economic progress in the long run. Chapter III studies the role of women in historical intergenerational mobility in the US. Previous research has focused on father-son income correlations. We build a new linked census panel to include daughters (1850-1940). To also incorporate the role of mothers, we propose a mobility measure that considers parental human capital alongside income (R2) and a semi-parametric latent variable method to estimate this measure from historical data. Our approach reveals increasing mobility, overturning conclusions based on income alone. Mothers’ human capital was more predictive than fathers’ and accounted for the increase in mobility. Aligning with their historical role in homeschooling, mothers were especially important when school access was limited.

Item Type:	Thesis (PhD)
Additional Information:	© 2024 Hugo Reichardt
Library of Congress subject classification:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
Sets:	Departments > Economics
Supervisor:	Ilzetzki, Ethan and Landais, Camille and Reis, Ricardo
URI:	http://etheses.lse.ac.uk/id/eprint/4732

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