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Economics

Bargaining for Volunteer Work: How Married Couples Decide to Volunteer and Who Holds the Power

Joshua Aaron Blonz ('08), Eleanor Brown

It has been estimated that 83.9 million American adults volunteer, totaling approximately $238 billion dollars of market value labor (Independent Sector, 2001). My summer research addressed the question of how the decision to volunteer is made, with a focus on household bargaining dynamics. Using data from the volunteer section of the 2003 PSID (Panel Study of Income Dynamics), I examined the relationship between who in the household does the volunteer work, the various types of volunteering they choose, and the relative power dynamics that affect those decisions. Previous economic research has identified earning power, religious attendance, and education to be sources of power within the household. Using these as models, and looking at married couples, I found that men's education and religious attendance has more influence than a women's in determining how much authority women have over decisions regarding charitable giving. I also found that the wife's hours of volunteering increase as the husband’s hourly wage increases over the hourly wage of the wife. The division of responsibilities, such as volunteering for youth (most likely related to their own children), also followed patterns which reflect traditional household bargaining power where wage and education are the most important factors.
Funding provided by: Economics (Aeir)

Economic Thought and Neoclassical Dominance Under Imperfect Competition

Peter Kelly ('08), Eleanor Brown

Introductory students of economics frequently quit before they quit being frustrated. Its assumptions distort human behavior, its graphs confuse concepts rather than clarify, and its methods of thought contradict how they think in other classes and in life. This project sought to bridge the methodological gap between economics and other disciplines by examining the primary methodological flaws of economics and the reasons for their persistence. I first identified Pomona’s “economics” as really “neoclassical economics”— what had been an entire discipline became an identifiable school, and what had been total hegemony became contentious. I read from heterodox schools of economic thought to identify the primary weak points of the neoclassical framework. I surveyed textbooks from the institutional and rhetorical schools to see how economics is taught by heterodox economists. I then assessed the debate to determine why neoclassical economics maintains dominance. Key conclusions were that the deductive, mathematical, approach of neoclassical economics facilitates a certain kind of precision—many of its absurdities are grudging ways of dealing with the messy world of social observation. Meanwhile, heterodox schools are kept on the fringes by piecemeal acceptance of their ideas, a method that ensures that the neoclassical methods remain dominant.
Funding provided by: SURP (Richter), Economics (Aeir)

An Investigation Into Federal Income Tax Withholding

Joshua David Ruben ('09), Michael Kuehlwein

Since the U.S. government established mandatory federal tax withholding in 1943, Americans have been increasingly overwithholding funds towards their federal income taxes. This trend continues up to the present with the total amount of taxes overpaid nearly $230 billion in 2007. This sum represents a substantial opportunity cost in forgone interest payments and underscores a host of “fiscal illusion” problems as well. Even more puzzling to economists is how overwithholding for federal income taxes seemingly contradicts the rational choice model. Simply put, it would make more sense for people to pay taxes as late as possible, leaving them with more disposable income. In this paper, I test existing theories for withholding patterns using a rich dataset, the IRS’s Special Panel of Income Tax Returns from 1979- 1990. These theories include built-in incentives to withhold (penalties), forced savings, and taxpayer confusion. In addition, I test whether income source, gross income, and risk-aversion help to clarify withholding patterns. The results indicate that withholding decisions are complex and can only be explained by a combination of theories. A blend of income level, taxpayer risk aversion, and income source and variability form a solid triumvirate that represents the most promising theories for predicting withholding patterns.
Funding provided by: SURP, Economics (Aeir)

Research at Pomona