## PEOPLE IN ECONOMICS

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### INEQUITY DETECTIVE
- Marianne Bertrand and Sendhil Mullainathan (2004) sent nearly 5,000 fictitious resumes in response to job ads in Boston and Chicago.
- Key finding: Black-sounding names, such as Lakisha, were 50 percent less likely to get a callback than white-sounding names, such as Emily, despite identical qualifications.
- Interpretation: Result difficult to attribute to anything other than explicit prejudice or unconscious bias.
- Impact: Cemented Bertrand’s reputation for documenting why women and minorities underperform relative to deserved outcomes, and why some top CEOs are paid more than they deserve.

### BRUSSELS TO BOOTH (BIOGRAPHICAL & INSTITUTIONAL CONTEXT)
- Education and career path:
  - Grew up in Belgium; enrolled at the Université Libre de Bruxelles intending to become a journalist, switched to economics.
  - Recommended to Harvard; received doctorate in 1998.
  - Started at Princeton; moved in 2000 to Chicago’s Booth School of Business and has remained there.
- Institutional features highlighted:
  - Booth allows interdisciplinary work (psychology, finance) and houses Nobel Prize winners Gene Fama and Richard Thaler.
  - Initial reactions at Chicago to work on racial discrimination were somewhat tepid; Booth’s environment of rigorous debate cited by Bertrand.

### MESSY MOTHERHOOD (GENDER INEQUITY FINDINGS)
- Core argument: Childbearing and childcare are potent explanations for gender gaps in careers.
- Empirical pattern: Careers of college-educated women essentially track those of their husbands until the birth of the first child; “Mothers take a massive earnings hit right after that first birth, and their income never recovers.”
- Evidence across education levels: Women graduates of top MBA programs tend to cut back hours and interrupt careers on becoming mothers (work with Lawrence Katz and Claudia Goldin).
- Mechanism: Women remain disproportionately responsible for home tasks, making it harder to meet inflexible schedules and longer time commitments in higher-paying occupations (e.g., finance).
- IMF-related findings cited:
  - Women accounted for fewer than 5 percent of CEOs at financial institutions.
  - Women made up less than 25 percent of representation on bank boards.
  - Banks with higher shares of women board members were managed better (finding referenced by Ratna Sahay and colleagues).
- Societal loss: Bertrand calls this a “misallocation of human capital” and notes the low share of women leading Fortune 500 companies (5 percent cited).

### PACE OF PROGRESS (NORMS AND HOUSEHOLD DYNAMICS)
- Positive trends: Gender gaps in education and labor force participation are declining globally, particularly in the developed world (noted as “good news” in Bertrand’s Ely Lecture).
- Social norms as barrier: Persistent norm that men should earn more than their wives slows progress.
- Empirical observation: Sharp drop-off in the percentage of US households where the wife earns more occurs just past the point where the woman makes over half the family income.
- Compensating behavior: In households where the woman earns more, the wife tends to take on more household chores.
- Consequences: Households where women earned more were more prone to marital strife and divorce (finding from Bertrand and co-authors).
- Advice to women: Bertrand’s commencement message—“if you want to have it all, make sure to check your date’s willingness for diaper duty and to let you shine as the brightest star at work.”

### STARRING OR SKIMMING? (CEO PAY AND CORPORATE GOVERNANCE)
- Magnitude of CEO pay disparity in the United States today: average CEO makes 350 times the average worker.
- Historical comparison: 20-to-1 ratio prevailed in 1965.
- Bertrand and Mullainathan’s contribution:
  - Showed CEO compensation often reflects luck rather than effort; e.g., CEO pay in the oil industry rose when oil prices rose (prices set in a world market outside CEO control).
  - Found CEO compensation increased when exchange rates moved in favor of firms with internationally traded products.
  - Famous conclusion: “CEO pay is as sensitive to a lucky dollar as to a general dollar.”
- Concept introduced: “Skimming” — when corporate governance is weak, CEOs can set their own pay with little shareholder oversight.
- Governance mitigants: Skimming less prevalent in better-governed firms, such as those with a large shareholder on the board who can limit CEO capture of the pay process.
- Broader debate: Bertrand’s work contributed to dialogue on corporate social purpose versus sole shareholder-value maximization; acknowledges potential trade-offs between financial return and social impact and notes some actors willing to “leave money on the table” for social impact.

### IMPERIAL TO INCLUSIVE (DISCIPLINARY SHIFT AND POLICY PERSPECTIVE)
- Disciplinary change: Economics has moved from an “imperial science” approach to embracing other social sciences; Bertrand: “economists have realized their mistakes and now embrace, rather than dismiss, the other social sciences.”
- Equity in economics: Contrasts earlier admonitions against focusing on distribution; Bertrand argues attention to inequality is compatible with efficiency because “inequality also hurts efficiency.”
- Quantified contribution: Work by Chang-Tai Hsieh found lowering barriers to entry for women and African Americans accounted for a quarter of the growth experienced by the United States (as cited by Bertrand).
- Policy lens: Economic policies should be evaluated holistically—e.g., a trade policy that passes overall cost-benefit tests but shuts down 80 percent of manufacturing plants in some communities produces concentrated inequity that must be considered.
- Institutional endorsement: Bertrand is pleased to see international financial institutions like the IMF embrace balancing efficiency and equity; she asserts “as countries get richer, they have more time and resources to devote to considerations of equity. We can afford an inclusive world.”
- Honors and recognition:
  - Prize in 2004 for “outstanding contributions by young women” in economics.
  - Prize in 2012 for “outstanding contributions to the field of labor economics.”
  - Picked in 2020 to give the Ely Lecture at the AEA annual meetings (selection made by Janet Yellen).

*Profile by Prakash Loungani, Finance & Development, March 2022.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2022/march/pie.pdf_