Big Structural Change

Globalization and technological change are among important factors that have recently intensified economic competition for advantageous positions (in education, work, and the society) and inequality of economic opportunity (i.e., income inequality that can be attributed to differences in people`s pre- determined circumstances, such as family background). To illustrate, globalization and technological change have been skill-biased in the sense that it increased incomes of high-skilled workers but resulted in low-skilled workers becoming cheaper in industrialized Western countries (see, e.g., Milanovic 2016). The competition for prestigious education, jobs, and positions has favored the higher income families at increasing rates. In response, people may change their beliefs about the causes of inequality and lack of mobility, and, in particular, the reasons for their own position within a society. These forces then may generate large-scale discontent and undermine the legitimacy of institutions in a liberal democracy, for example, via mass protests and social unrest, as well as the rise of anti-establishment parties and movements. We examine theoretically and experimentally the extent to which people change their attitudes towards institutions when the privileged have a disproportionate amount of political power and may resist leveling the playing field. We hypothesize that this resistance leads to conflicts between the winners and losers of the prevailing regime. Importantly, the resistance to leveling the playing field and conflicts may be mitigated or exacerbated depending on the societal structure, in particular, the steepness of the social hierarchy. The steepness of the social hierarchy concerns, for example, whether schools and jobs in a society are highly segregated into elite and non-elite components. In most European societies, prestige hierarchies in education and jobs are less steep than in the United States. Increasing the elite and non-elite segregation in the education and job market may have significant economic benefits (for example, in the global competition for top talent), but it may have highly destabilizing consequences for the society if it further reduces the willingness of the privileged high income to level the playing field. In a nutshell, our project aims to understand theoretically and experimentally how economic competition for prestigious positions, intensified by technological change and globalization, may exacerbate existing inequalities, because the privileged income groups may be reluctant to level the playing field. We also aim to understand how the format of the economic competition in a society (in particular, whether the returns to achieving higher ranks are steeper or flatter) may mitigate or exacerbate societal discontent.