Marianne Bertrand: Inequity Detective
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Bibliographic details
- Authors: PRAKASH LOUNGANI
- Published: March 1, 2022
Profile and career milestones
- Author/profile: Prakash Loungani; F&D Magazine; March 2022.
- Education and appointments:
- PhD from Harvard in 1998.
- Started career at Princeton; moved in 2000 to Chicago’s Booth School of Business, where she has remained.
- Awards and honors:
- Prize in 2004 for “outstanding contributions by young women” in economics.
- Prize in 2012 for “outstanding contributions to the field of labor economics.”
- Selected in 2020 to give the Ely Lecture at the annual meetings of the American Economic Association (AEA).
Landmark research on racial discrimination
- 2004 audit study (with Sendhil Mullainathan):
- Sent nearly 5,000 fictitious resumes in response to job ads in Boston and Chicago.
- Found that Black-sounding names, such as Lakisha, were 50 percent less likely to get a callback than white-sounding names, such as Emily, with resumes alike in qualifications.
- Interpreted as difficult to attribute to anything other than explicit prejudice or unconscious bias.
- Real-world resonance:
- Study invoked in contemporary anecdotes of housing appraisal manipulation highlighting racial bias.
Gender inequity, motherhood, and labor outcomes
- Core findings:
- “Mothers take a massive earnings hit right after that first birth, and their income never recovers.”
- Careers of college-educated women track those of their husbands until the birth of the first child; declines thereafter.
- Women graduates of top MBA programs tend to cut back hours and interrupt careers on becoming mothers.
- Mechanisms emphasized:
- Childbearing and childcare as “more potent yet prosaic” explanations for gender gaps.
- Women disproportionately responsible for home and childcare tasks, making it harder to meet inflexible schedules in higher-paying occupations.
- Evidence on representation in finance (from IMF-related research cited):
- Women accounted for fewer than 5 percent of CEOs at financial institutions.
- Women made up less than 25 percent of the representation on bank boards.
- Social cost:
- Bertrand: “Women are not born with a comparative advantage in changing diapers, so it follows that we must be leaving some money on the table by having only 5 percent of Fortune 500 companies run by women.”
Social norms, household dynamics, and pace of progress
- Progress acknowledged:
- Ely Lecture stressed “good news” that gender gaps in education and labor force participation are on the decline, especially in the developed world.
- Norms studied:
- Norm that men should earn more than their wives; sharp drop-off in percentage of US households where the wife earns more once she makes over half the family income.
- Households where the woman earns more show “compensating behavior” by the wife to take on more household chores; such households were more prone to marital strife and divorce.
- Advice to younger women (commencement remarks): “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.”
CEO pay, “skimming,” and corporate governance
- Trends and magnitudes:
- In the United States today, the average CEO makes 350 times the average worker, compared with a 20-to-1 ratio that prevailed in 1965.
- Key findings (with Mullainathan and other work):
- CEO compensation increases with factors outside a CEO’s control (e.g., oil prices, exchange rates), implying pay driven in part by luck.
- Conclusion from the paper: “CEO pay is as sensitive to a lucky dollar as to a general dollar.”
- “Skimming” view: when corporate governance is weak, CEOs can set their own pay with little oversight; skimming is less prevalent in better-governed firms with large shareholders able to limit CEO capture.
- Broader implications:
- Bertrand links pay structures and short-termism to firms’ neglect of social purpose, while noting potential trade-offs between financial return and social impact: “some people out there are really willing to leave money on the table if they think they can have a [social] impact.”
Shifts in economics: interdisciplinarity and equity
- Disciplinary change:
- From “an imperial science” to greater embrace of other social sciences; Bertrand: “to put it humbly, economists have realized their mistakes and now embrace, rather than dismiss, the other social sciences.”
- Equity and efficiency:
- Challenges the view that focusing on distribution undermines sound economics; argues that “inequality also hurts efficiency.”
- Cites Booth colleague Chang-Tai Hsieh’s finding that lowering barriers to entry for women and African Americans accounted for a quarter of US growth.
- Policy lens:
- Advocates assessing economic policies holistically: even if a trade policy passes aggregate cost-benefit tests, concentrated losses (e.g., shutting down 80 percent of manufacturing plants in some communities) require balancing equity concerns.
- Welcomes international financial institutions like the IMF embracing the balance between efficiency and equity: “it’s a no-brainer, really.”
- Institutional engagement:
- Notes IMF work on Inclusive Growth and Structural Policies that guides how policy advice can better balance efficiency and equity.
Source: Prakash Loungani, F&D Magazine, March 2022 — “Marianne Bertrand: Inequity Detective.”
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