Isabel Skak Olufsen defends her PhD thesis at the Department of Economics

Candidate:

Isabel Skak Olufsen, Department of Economics, University of Copenhagen

Title:

Inequality, Well-Being, and the Role of Peers

Supervisors:

• Claus Thustrup Kreiner, Professor, Department of Economics, University of Copenhagen
• Søren Leth-Petersen, Professor, Department of Economics, University of Copenhagen

Assessment Committee:

• Christina Gravert, Associate Professor, Department of Economics, University of Copenhagen
• Andrew Clark, Professor, Paris School of Economics
• Fane Groes, Associate Professor, Department of Economics, Copenhagen Business School

Summary:

Over the past decades, many Western countries have experienced steadily rising inequality and declining social mobility, raising concerns among policymakers and the public alike. To guide policy to mitigate these trends, it is important to understand the nature of the inequality, its potential consequences, and individuals' attitudes towards policies to reduce inequality. This PhD sheds light on the aforementioned in four self-contained chapters using Danish administrative, survey, and experimental data.

The first chapter, which is joint work with Claus Thustrup Kreiner, investigates whether inequality in well-being is meritocratic, i.e., whether differences in subjective well-being are mostly related to socioeconomic background or to individual merits (ability and effort). We decompose inequality in subjective well-being into inequality due to socioeconomic background and meritocratic inequality due to differences in individual merits such as school performance. We find that inequality in well-being is more meritocratic than income inequality and more meritocratic as people grow older.

The second chapter is written with Jesper Fries. In this chapter, we analyze the effect of having resourceful peers on pupils' well-being, absence rate, and academic performance in elementary school. To estimate the causal effect, we compare pupils in the same school who started school in different years and, consequently, were exposed to different shares of resourceful peers. We find that a higher share of resourceful peers does not affect absence rates, but increases well-being and performance.

The third chapter is written with Camilla Skovbo Christensen. We estimate the effect of cohabiting with a partner on stock market participation using rich administrative data from Denmark. We show that cohabitation increases both entry into and exit from the stock market, leaving the average participation rate unchanged. Those who enter the stock market are predominantly individuals who move in with a partner with stock market experience. Those who exit are predominantly individuals who move in with a partner while also becoming homeowners. Our results suggest that information spillover within couples can increase participation, and that couples who purchase a house at cohabitation face liquidity needs that offset the reduced barriers to participation.

The fourth chapter is joint work with Thomas Epper, Ernst Fehr, Claus Thustrup Kreiner, Søren Leth-Petersen, and Peer Ebbesen Skov. We investigate whether advantageous inequality (comparison relative to those worse off) and disadvantageous inequality (comparison relative to those better off) predicts support for redistribution. Theory predicts that support for public redistribution increases with both types of inequality aversion, while private redistribution should increase with advantageous inequality. Our empirical results provide strong support for these predictions and with quantitatively large effects compared to other predictors.

An electronic copy of the dissertation can be requested here: lema@econ.ku.dk