Does Hierarchy Drive Income Inequality? Liberal Arts & Professional Studies Postcoctoral Fellowship Proposal

The York Faculty of Liberal Arts & Professional Studies (LA&PS) awards three postdoctoral fellowships annually, of which no more than one can go to a former York PhD. For 2021-2022, this fellowship went to former York PhD Dr. Blair Fix. The award is for one year, with a possible one-year extension. The project’s advisor is Jonathan Nitzan.

PROJECT SYNOPSIS

Income inequality has, over the last 4 decades, increased dramatically in the United States and Canada. It is a concerning trend. Not only is inequality objectionable ethically, it also seems to be corrosive to human welfare. As inequality grows, human well-being worsens. But while the extent and effects of inequality are well-studied, the cause(s) of growing inequality remains poorly understood. My research attempts to address this deficiency.

I propose that hierarchy — the rank ordering of individuals within a chain of command — is central to how humans distribute resources. The idea is that individuals within a hierarchy tend to use their power to accumulate resources. The result is that income tends to grow with hierarchical rank.

I have assembled a variety of evidence that confirms (at static points in time) this hierarchy-income hypothesis. My post-doctoral research will attempt to extend the evidence to understand how hierarchy relates to the growth of inequality. I propose that the recent growth of top incomes (in the United States and Canada) has been caused by a hierarchical redistribution of income. The idea is that income has been taken from those at the bottom of the corporate hierarchy and given to those at the top.

To investigate this hypothesis, I will extend a large-scale numerical model developed during my PhD studies. This model is the first (to my knowledge) to rigorously connect the distribution of income at the macro-level to the fine-scale, hierarchical structure of firms. I have previously found that this model accurately predicts key features of the US distribution of income. In my post-doctoral research, I will extend the model to study income redistribution — changes in income distribution over time.

By studying how growing income inequality (in the US and Canada) relates to the hierarchical structure within firms, I hope to illuminate new ways to combat inequality.