Suresh Naidu

Intergenerational Wealth Transmission and the Dynamics of Inequality in Small-Scale Societies

Origins of Egalitarianism Wealthy contemporary societies exhibit varying extents of economic inequality, with the Nordic countries being relatively egalitarian, whereas there is a much larger gap between top and bottom in the United States. Borgerhoff Mulder et al. (p. 682; see the Perspective by Acemoglu and Robinson) build a bare-bones model describing the intergenerational transmission of three different types of wealth—based on social networks, land and livestock, and physical and cognitive capacity—in four types of small-scale societies in which livelihoods depended primarily on hunting, herding, farming, or horticulture. Parameter estimates from a large-scale analysis of historical and ethnographic data were added to the model to reveal that the four types of societies display distinctive patterns of wealth transmission and that these patterns are associated with different extents of inequality. Some types of wealth are strongly inherited and, hence, contribute to long-term economic inequality. Small-scale human societies range from foraging bands with a strong egalitarian ethos to more economically stratified agrarian and pastoral societies. We explain this variation in inequality using a dynamic model in which a population’s long-run steady-state level of inequality depends on the extent to which its most important forms of wealth are transmitted within families across generations. We estimate the degree of intergenerational transmission of three different types of wealth (material, embodied, and relational), as well as the extent of wealth inequality in 21 historical and contemporary populations. We show that intergenerational transmission of wealth and wealth inequality are substantial among pastoral and small-scale agricultural societies (on a par with or even exceeding the most unequal modern industrial economies) but are limited among horticultural and foraging peoples (equivalent to the most egalitarian of modern industrial populations). Differences in the technology by which a people derive their livelihood and in the institutions and norms making up the economic system jointly contribute to this pattern.

Economic Determinants of Land Invasions

This study estimates the effect of economic conditions on redistributive conflict. We examine land invasions in Brazil using a panel data set with over 50,000 municipality-year observations. Adverse economic shocks, instrumented by rainfall, cause the rural poor to invade and occupy large landholdings. This effect exhibits substantial heterogeneity by land inequality and land tenure systems, but not by other observable variables. In highly unequal municipalities, negative income shocks cause twice as many land invasions as in municipalities with average land inequality. Cross-sectional estimates using fine within-region variation also suggest the importance of land inequality in explaining redistributive conflict.

Democracy, Redistribution and Inequality

In this paper we revisit the relationship between democracy, redistribution and inequality. We first explain the theoretical reasons why democracy is expected to increase redistribution and reduce inequality, and why this expectation may fail to be realized when democracy is captured by the richer segments of the population; when it caters to the preferences of the middle class; or when it opens up disequalizing opportunities to segments of the population previously excluded from such activities, thus exacerbating inequality among a large part of the population. We then survey the existing empirical literature, which is both voluminous and full of contradictory results. We provide new and systematic reduced-form evidence on the dynamic impact of democracy on various outcomes. Our findings indicate that there is a significant and robust effect of democracy on tax revenues as a fraction of GDP, but no robust impact on inequality. We also find that democracy is associated with an increase in secondary schooling and a more rapid structural transformation. Finally, we provide some evidence suggesting that inequality tends to increase after democratization when the economy has already undergone significant structural transformation, when land inequality is high, and when the gap between the middle class and the poor is small. All of these are broadly consistent with a view that is different from the traditional median voter model of democratic redistribution: democracy does not lead to a uniform decline in post-tax inequality, but can result in changes in fiscal redistribution and economic structure that have ambiguous effects on inequality.

The Economic Effects of a Citywide Minimum Wage

This paper presents the first study of the economic effects of a citywide minimum wage—San Franciscos adoption of an indexed minimum wage, set at

Recruitment Restrictions and Labor Markets: Evidence from the Postbellum U.S. South

8.50 in 2004 and

Bases, Bullets, and Ballots: The Effect of U.S. Military Aid on Political Conflict in Colombia

9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fast-food and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.

Chapter 21 – Democracy, Redistribution, and Inequality

This article studies the effect of recruitment restrictions on mobility and wages in the postbellum U.S. South. I estimate the effects of criminal fines charged for “enticement” (recruiting workers already under contract) on sharecropper mobility, tenancy choice, and agricultural wages. I find that a

Political Language in Economics

13 (10%) increase in the enticement fine lowered the probability of a move by black sharecroppers by 12%, daily wages by 1 cent (.1%), and the returns to experience for blacks by 0.6% per year. These results are consistent with an on‐the‐job search model, where the enticement fine raises the cost of recruiting an employed worker.

Political Polarization and the Dynamics of Political Language: Evidence from 130 Years of Partisan Speech

Does foreign military assistance strengthen or further weaken fragile states facing internal conflict? Aid may strengthen the state by bolstering its repressive capacity vis-a-vis armed non-state actors, or weaken it if resources are diverted to these very groups. We examine how U.S. military aid affects political violence in Colombia. We exploit the allocation of U.S. military aid to Colombian military bases, and compare how aid affects municipalities with and without bases. We use an instrument based on worldwide increases in U.S. military aid (excluding Latin America). We find that U.S. military assistance leads to differential increases in attacks by paramilitaries, but has no effect on guerrilla attacks. Aid also results in more paramilitary (but not guerrilla) homicides during election years, particularly in politically competitive municipalities. The findings suggest that foreign military assistance may strengthen armed non-state actors, undermining domestic political institutions.

Monopsony Power in Migrant Labor Markets: Evidence from the United Arab Emirates

In this paper we revisit the relationship between democracy, redistribution, and inequality. We first explain the theoretical reasons why democracy is expected to increase redistribution and reduce inequality, and why this expectation may fail to be realized when democracy is captured by the richer segments of the population; when it caters to the preferences of the middle class; or when it opens up disequalizing opportunities to segments of the population previously excluded from such activities, thus exacerbating inequality among a large part of the population. We then survey the existing empirical literature, which is both voluminous and full of contradictory results. We provide new and systematic reduced-form evidence on the dynamic impact of democracy on various outcomes. Our findings indicate that there is a significant and robust effect of democracy on tax revenues as a fraction of GDP, but no robust impact on inequality. We also find that democracy is associated with an increase in secondary schooling and a more rapid structural transformation. Finally, we provide some evidence suggesting that inequality tends to increase after democratization when the economy has already undergone significant structural transformation, when land inequality is high, and when the gap between the middle class and the poor is small. All of these are broadly consistent with a view that is different from the traditional median voter model of democratic redistribution: democracy does not lead to a uniform decline in post-tax inequality, but can result in changes in fiscal redistribution and economic structure that have ambiguous effects on inequality.