Tuesday, 10 March 2009

Income, education, and ignorance

In my last post, I looked at the correlates of what I call "economic thinking".

Bryan Caplan asks for more details on the relative effects of income and education on economic thinking. Of course, in most work looking at political ignorance, education matters more than income. That's also what I found when I looked at the correlates of ignorance two posts ago. And, in Caplan's work, education matters a lot while income doesn't matter at all in explaining what makes people think like economists.

I re-ran the economic thinking regressions, dropping the ignorance variable to compare education and income. And, to make the comparisons stark, I'll set the baselines in each case as being the lowest level of education or of income. So, the null for education is "less than secondary", which includes "incomplete primary education/none" and "primary school completed"; for income, it's "household income less than $15,900", which includes "No income" and "less than $15,900". I only here report results on the education, income, and ignorance variable. Results will vary from the previous ones as my null has changed on the education and income indicator variables, and because I've fixed a rather trivial coding glich that has meant that the second decimal place on most of my coefficients has had to be updated.

What does that mean? It means that, in my sample, having the highest level of income does more to increase economic thinking than does having the highest level of education. But it's still not quite a fair comparison: while 16.5% of the sample has the highest level of education, only 9% of the sample has the highest level of income. The "University" variable will include folks with graduate degrees and folks with just a Bachelor's degree. I had previously aggregated different levels of education that seemed to have the same effect; let's move to the finer gradations. 7% of my sample has a postgraduate degree, for example. Here goes. Everything above again but this time, with finer differences in education levels.

I previously had aggregated together the two types of secondary school diplomas; we see here that they have the same effect on economic thinking (namely, none). I had aggregated together technical qualifications with incomplete university degrees: it looks like incomplete university degrees are more important than technical qualifications. And, I had previously aggregated together undergrad and postgrad degrees: the effects here seem pretty close to identical.

The effects of income and education are roughly comparable. The lowest levels of both have little effect. Middling levels of both have some effect. And the highest levels of each have a strong effect. Having an undergraduate university degree has a stronger effect than having the second-highest level of income, but being in the highest income bracket looks to have a stronger effect than being in the highest education category. Running some post-estimation tests, though, we can't reject that the coefficient on the highest income bracket is equal to the coefficient on the postgraduate degree. I do come closer to rejecting equality when the ignorance variable is included: the ignorance variable attenuates the effects of education much more than it does the effects of income.

So, the condensed version: income matters more in my sample than it does in Bryan's. I don't have a simple answer as to why. In Bryan's work, he controls for partisanship and ideology; I leave partisanship out because I want to use "economic thinking" as something that explains party choice rather than the other way round, but I did control for ideology. If I throw the different party vote intentions in as controls in these regressions, they only somewhat attenuate the effects of income on "economic thinking": they'll push the coefficient on the highest income category down to about 0.43, but no farther. Perhaps education matters a bit less here because of the nature of New Zealand university degrees. Undergrads here complete a three year programme with fewer electives. While most of the commerce students will take our introductory micro and macro papers, not many students from other disciplines come over. A quick chat with our stage one lecturer suggests about twenty percent of first year students at Canterbury take our stage one economics courses, and about eighty percent of those are going to do a Commerce discipline as a major. My impression is that a higher fraction of first year students in the US do stage one economics.


  1. One thing that stood out to me from your previous posts: the left wing ideologues were less ignorant, AND worse economic thinkers. This is contrary to the overall correlation. Left wingers are probably disproportionately situated in the lower income levels (certainly true in the US). I agree that degree/education structure could be an influence as NZ degrees are definitely less broad than US ones, but could the nature of this left wing group explain this difference in part?

  2. I checked income and left-wing ideology in a few ways. First, I ran a simple probit regression: the poorest are no more likely to be left-wing than are the richest, but the richest are more likely to be right wing. I then also ran some conditional means: the fraction of each income cohort reporting left-wing ideology doesn't vary much by income cohort, or at least not systematically.

    Since I'm also correcting for income in the regressions, I don't think it could have been that income were driving things, but even if I hadn't, the raw income breakdowns don't bear it out.