Edward Conard

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Chetty & Saez distance themselves from prior claims that government expenditures financed by progressive taxation reduces poverty

Lost in the coverage surrounding Chetty & Saez’s newly released paper, which debunks the claim that income mobility is declining in the U.S., are the provocative conclusions in their companion paper, “Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States”. The authors seems to back off their prior claim that, “the level of local tax expenditures…is positively correlated with intergenerational mobility…that this correlation is robust to…local…characteristics [and]…that the…progressivity of state income taxes are positively correlated with intergenerational mobility.” They now admit, “There is [only] a weak… correlation between local tax progressivity and upward mobility…but the correlation is not statistically significant…when other [local] factors are considered,” and that the correlation between upward mobility and government expenditures is “[even] smaller than that between local tax rates and upward mobility.”

Perhaps revealingly, the authors don’t include their first paper in the bibliography of their second paper! And they didn’t include taxes or government expenditures in the second paper’s summary analysis of factors affecting mobility (i.e. their multifactor regression). It would have been interesting to see how much additional predictive power these factors contribute.

Both papers show that single motherhood has an overwhelmingly negative effect on mobility (even if the text of the first paper remains oddly silent about it). When one factor alone provides nearly all the predicative power of a model, and that factor squares with common sense,  researchers must, at least in part, evaluate other factors by the amount of incremental predicative power they add (i.e. use stepwise regression). Instead, the authors do the opposite. They submit a multifactor model that does no better at predicting upward mobility than simply knowing the share of children raised by single mothers in a community and use it to question whether single motherhood has as large an impact on poverty as it appears.

Details aside, Chetty and Saez’s analysis of upward mobility seems to do little more than support the conservative view that the culture of poverty in America, which includes high incidents of: unwed motherhood, high school drop outs, criminality, and other harmful factors, hurts children and makes it much harder for them to climb out of poverty. Factors that isolated these communities further—longer commutes to work outside the community, greater racial segregation and, ultimately, a larger income gap between the poor and middle class when the more-adapt move away—foster this ruinous culture and make escape even harder.

The Chetty/Saez analysis debunks several other myths as well. They find that the success of the one percent has little if any effect on mobility. Ergo, the economy is not zero-sum where the rich succeed at the expense of the poor. Their evidence also indicates government expenditures to combat poverty are weak compared to the powerful effects of culture. Lower student-teacher ratios, for example, do little if anything to improve mobility in urban areas; only improving test scores does. And better access to college does little to help the poor presumably because few truly capitalize on it.

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