Economic access and mobility

Economic access and mobility

December 15, 2021 | By Dean Sevin Yeltekin

The recent installment of the bi-annual Carnegie-Rochester-NYU Conference on Public Policy, co-sponsored by Simon and hosted virtually from November 12-13, 2021 by Carnegie Mellon,  provided an opportunity for academic researchers from a variety of institutions to showcase ongoing work at the intersection of economic mobility, opportunity, gender, and race.  

Issues of equity, opportunity and access are familiar territory at Simon, and as an academic institution, scholarship that uncovers new facts and delivers fresh insights and frameworks is how we contribute to informed discussion. By supporting research that sheds light on the economic impact of barriers to opportunity and access, we help correct misconceptions and provide more angles to consider. As the pandemic continues to create new inequities and bring old ones into stark relief, we are committed to using every tool at our disposal to address questions that have gone unanswered for too long. 

I’d like to draw your attention to three papers presented at the conference: 

Intergenerational Mobility Begins Before Birth
Ananth Seshadri and Anson Zhou of University of Wisconsin-Madison

This paper builds a case for improving social mobility and addressing racial inequality by helping women fulfill family planning goals. Nearly 40% of all live births in the U.S. are unintended (mistimed or unwanted), and Black Americans and women with lower socioeconomic status are disproportionately affected by unintended births. Existing research has demonstrated that having unprepared parents plays a negative role in a child’s human capital development. 

By calibrating the standard Becker-Tomes model of human capital to account for unintended births, the researchers find that intergenerational mobility is significantly lower with unintended fertility than it would be without. And, when the model is calibrated to match unintended birth rates by race, it reveals that differences in family planning access can account for 20% of the racial gap in upward mobility. It follows, then, that by expanding access to family planning services through programs like Medicaid and Title X, policymakers can significantly improve social mobility and racial inequality.

Female Entrepreneurship and Financial Frictions
Marta Morazzoni and Andrea Sy, University of Pompeu Fabra, Spain

Female business owners make up roughly 35% of the entrepreneurial pool in the U.S. Yet, in 2018, they received only 2.2% of total startup funding. Despite the obvious underrepresentation of women in entrepreneurship, research that measures the economy-wide impact of gender disparities in credit access and capital misallocation is scarce.
The authors of this paper set out to provide missing puzzle pieces and fill this gap. Using a rich dataset comprised of 5,000 U.S. entrepreneurs between 2004-2011, they establish that female-owned firms are 10% more likely to be rejected when applying for a bank loan. They also found that female entrepreneurs have a 12% higher average product of capital, a sign of capital misallocation. In other words, too little capital is allocated to female entrepreneurs.

Their analysis concludes that inequitable credit access can explain the majority of gender-based differences in capital allocation across firms and a third of the disparities in entrepreneurial rates. Eliminating this gap doesn’t just have a positive effect on entrepreneurial activity and capital allocation—it also leads to a 4% increase in total U.S. output, a large and significant aggregate economic impact. To unlock new potential, the authors point to fiscal policies that help female entrepreneurs secure loans and grants, like the Small Business Administration’s sponsorship of women’s business centers across the country. 

Homeownership Segregation 
Nirupama Kulkarni (Reserve Bank of India) and Ulrike Malmendier (University of California-Berkeley)

For decades, the federal government has aimed to improve upward mobility by increasing homeownership rates. Part of the push is motivated by the desire to leave behind discriminatory practices like redlining and the Federal Housing Administration denying mortgage insurance in high-minority neighborhoods before the Fair Housing Act. 

But the effects of this discrimination still linger in the form of land-use restrictions, which reinforce the longstanding residential segregation between wealthier white homeowners and poorer minority renters. In this paper, the authors argue that this segregation continues to put a drag on upward mobility for low-income families. They propose a new way of measuring segregation and propose bans on exclusionary zoning policies. 

The bottom line.

It doesn’t take a scholar to look around and recognize that the past few years have lifted some boats while sinking others—but it does take one to create a data-informed picture of the specific barriers to access and mobility we are witnessing in our country today. 

Throughout the conference, I was struck by the far-reaching impact of the barriers described in the papers presented, whether they come in the form of exclusionary housing policies or a lack of access to contraception. These barriers don’t just arrest the momentum of women entrepreneurs, low-income renters, or another subset of the population. They limit our society’s potential as a whole. 

On the flipside of the coin, policies that address barriers to access and mobility for specific populations benefit all of us. The results we’re seeing in papers like these should make us sit up and pay attention. Though we still have plenty of ground to cover as a society, they point to a more equitable, prosperous future that is within our reach. 

P.S. The papers from the conference will be published in the Journal of Monetary Economics (JME), Spring 2022 edition after completing the peer review process. JME, one of the leading journals in economics, was established and is housed at Simon.
 

Sevin Yeltekin 
Dean, Simon Business School

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