Does Policy Committee Diversity Affect Public Trust and Expectations?

When: 02 Nov 2020, 14:15-15:30
Where: Zoom
Speaker: Michael Weber

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Increasing the diversity of policy committees has climbed to the top of the political agenda around the world, but the economic motivations and effects of diversity in policy committees are still elusive. In this paper, we propose a randomized control trial to test for the effects of making consumers aware of the presence of underrepresented groups in the US Fed's FOMC on the FOMC's ability to manage consumers' expectations.  We find that White women and African American men update their unemployment expectations more in line with FOMC forecasts after being made aware of the presence of members of their demographic group in the FOMC. Consumers who face multiple facets of underrepresentation and whose demographic groups are not represented in the FOMC, such as African American women, are the most distrustful of the Fed  and their macroeconomic expectations are the farthest away from FOMC forecasts. At the same time, overrepresented groups, such as White men, do not react negatively to awareness of minority representation in the FOMC. Overall, our findings suggest that more diverse policy committee might improve the effectiveness of such committees in managing the expectations of underrepresented consumers without negative effects on other consumers.