In this paper we analyze the interaction of income and preference heterogeneity in a political economy framework. We ask whether the presence of preference heterogeneity (arising, for example, from different ethnic groups or geographic locations) affects the ability of the poor to extract resources from the rich. We study the equilibrium of a game in which coalitions of individuals form parties, parties propose platforms, and all individuals vote, with the winning policy chosen by plurality. Political parties are restricted to offering platforms that are credible (in that they belong to the Pareto set of their members). The platforms specify the values of two policy tools: a general redistributive tax which is lumpsum rebated (or used to fund a general public good) and a series of taxes whose revenue is used to fund specific (targeted) goods tailored to particular preferences or localities. Our analysis demonstrates that taste conflict first dilutes but later reinforces class interests. When the degree of taste diversity is low, the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers. As taste diversity increases in society, the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution. As diversity increases further, however, the only policy that can emerge supports exclusively general redistribution.

This paper discusses some recent advances in the area of culture and economics and examines the effect of culture on a key economic outcome: female labor supply. To separate the effect of market variables and institutions from culture, I use an epidemiological approach, studying second-generation American women. I use both female LFP and attitudes in the women’s country of ancestry as cultural proxies and show that both cultural proxies have quantitatively significant effects on women’s work outcomes. The paper concludes with some suggestions for future empirical and theoretical research topics in this area.

Fertility: The Role of Culture and Family Experience with A. Fogli
Published in Journal of the European Economic Association, 2006

This paper attempts to disentangle the direct effects of experience from those of culture in determining fertility. We use the GSS to examine the fertility of women born in the US but from different ethnic backgrounds. We take lagged values of the total fertility rate in the woman’s country of ancestry as the cultural proxy and use the woman’s number of siblings to capture her direct family experience. We find that both variables are significant determinants of fertility, even after controlling for several individual and family-level characteristics.

This paper examines the interactions between household formation, inequality, and per capita income. We develop a model in which agents decide to become skilled or unskilled and form households. We show that the equilibrium sorting of spouses by skill type (their correlation in skills) is an increasing function of the skill premium. In the absence of perfect capital markets, the economy can converge to different steady states, depending upon initial conditions. The degree of marital sorting and wage inequality is positively correlated across steady states and negatively correlated with per capita income. We use household surveys from 34 countries to construct several measures of the skill premium and of the degree of correlation of spouses’ education (marital sorting). For all our measures, we find a positive and significant relationship between the two variables. We also find that sorting and per capita GDP are negatively correlated and that greater discrimination against women leads to more sorting, in line with the predictions of our model.

This paper argues that the growing presence of a new type of man–one brought up in a family in which the mother worked–has been a significant factor in the increase in female labor force participation over time. We present cross-sectional evidence showing that the wives of men whose mothers worked are themselves significantly more likely to work. We use variation in the importance of WWII as a shock to women’s labor force participation–as proxied by variation in the male draft rate across US states–to provide evidence in support of the intergenerational consequences of our propagation mechanism.

Equity and Resources: An Analysis of Education Finance Systems with R. Rogerson
Published in Journal of Political Economy, 2003

We analyze five education finance systems: local, State, foundation, power equalizing with recapture (PER) and power equalizing without recapture (PEN). In a calibrated model, we find that finance systems have large effects on educational resources and equity. The trade-off between equity and resources, however, is not monotone. Ranking systems by expected utility, we find that PER consistently ranks highest, though it provides fewer resources to education than the foundation and PEN systems, and is less equitable than a state system. We prove that for an important subset of preferences, PER will win in majority voting comparisons with the other systems.

Household Formation, Inequality, and the Macroeconomy
Published in Journal of the European Economic Association, 2003

This paper examines how family structure can influence the macroeconomy. It uses a simple model where the key features are taken as exogenous and shows that the sorting of individuals into families can have important quantitative effects on human capital formation, inequality and income. It then discusses how these features can be endogenized and suggests avenues for future research.

Sorting and Long-Run Inequality with R. Rogerson
Published in Quarterly Journal of Economics, 2001

Many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality. To investigate this, we construct a dynamic model of intergenerational education acquisition, fertility and marital sorting and parameterize the steady state to match several basic empirical findings. We find that increased sorting will significantly increase income inequality. Four factors are important to our findings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children’s years of education, wages that are sensitive to the relative supply of skilled workers, and borrowing constraints that affect educational attainment for some low income households

The Scope for Collusive Behavior Among Debtor Countries with J. Glazer
Published in Journal of Development Economics, 1990

Strategic Models of Sovereign-Debt Renegotiation with R. Rosenthal
Published in Review of Economic Studies, 1990

Comment on ‘Industrial Wage Differential, International Competition and Trade Policy’ by L. Katz and L. Summers
In Trade Policies for International Competitiveness, edited by R. Feenstra, 1989, University of Chicago Press.