Margin of Safety: Life History Strategies and the Effects of Socioeconomic Status and Macroeconomic Conditions on Self-Selection into Accounting

68 Pages Posted: 13 Jun 2017

See all articles by Justin Leiby

Justin Leiby

University of Illinois at Urbana-Champaign

Paul E. Madsen

University of Florida

Date Written: June 12, 2017

Abstract

We use experimental and archival evidence to show that people who had low socioeconomic status (SES) as children participate in the U.S. accounting labor market in distinctive and consequential ways. Drawing on life history theory, we predict and show that low SES individuals select into accounting at disproportionately high rates relative to other fields, an effect driven by accounting’s relatively high job security. Supplemental tests are consistent with these low SES individuals being a source of high quality human capital for the accounting profession, as low SES individuals selecting into accounting possess desirable attributes at relatively high rates. From a social perspective, we provide theory and evidence consistent with accounting being an important and secure source of upward social mobility in comparison to other fields. However, recessions cause selection into accounting by low SES individuals to decrease at a higher rate than in other fields, compromising these professional and social benefits. For example, our evidence is consistent with the “low SES effect” improving gender diversity among entrants into the accounting labor market during good economic times. However, lower self-selection rates during recessions are particularly pronounced among low SES females, who may thus bear the brunt of lost professional and social benefits.

Keywords: Self-Selection, Accounting Labor Market, Socioeconomic Status, Inequality, Life History Theory, Evolutionary Psychology, Human Capital

JEL Classification: E20, J20, J24, J44, M40, I24, Z13

Suggested Citation

Leiby, Justin and Madsen, Paul E., Margin of Safety: Life History Strategies and the Effects of Socioeconomic Status and Macroeconomic Conditions on Self-Selection into Accounting (June 12, 2017). Humanistic Management Association, Research Paper Series No. 17-32, Available at SSRN: https://ssrn.com/abstract=2985135 or http://dx.doi.org/10.2139/ssrn.2985135

Justin Leiby (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 S 6th St
Champaign, IL 61822
United States
2173007825 (Phone)

Paul E. Madsen

University of Florida ( email )

Gainesville, FL 32611
United States

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