Redistributive choices and increasing income inequality: experimental evidence for income as a signal of deservingness (original) (raw)
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SSRN Electronic Journal, 2015
This study uses a lab experiment to examine the relation between income inequality and individual redistribution choices. The median voter theorem suggests that support for redistribution should increase when inequality increases. However, empirically this is not always the case. Using a difference-indifferences strategy, we find that the relation between inequality and redistribution preferences differs depending on how income is assigned. Specifically, we find that increases in effort-based income inequality lead to lower redistribution rates while increases in random income inequality lead to higher redistribution rates. These findings support a model where preferences for redistribution depend upon work earnings as a signal of deservingness.
Is skewed unfair? The role of experienced inequalities and self-interest in redistributive behavior
Although income inequality has been growing in most of the OECD countries since the 1970s, demands for more redistributive policies have stagnated. While many scholars looked at the macroeconomic factors, only a few focused on the cognitive mechanisms behind preferences for redistribution. Building from behavioral and political economists' literature, our two preregistered studies aimed to test how experienced inequalities and self-interest influence individuals’ ideal income distribution. Study one (N=366) used a spectator/worker between-subject experimental design to show that individuals adjust their ideal level of inequality to the one they have experienced. Study two (N=117) tested how self-interest moderates the motive for justice, most notably for individuals benefiting from income inequalities. Studying the inequality gap by combining recent theories and methods from behavioral economics and political sciences not only advance our understanding of how experienced inequal...
The effect of initial inequality on meritocracy: A voting experiment on tax redistribution
Journal of Economic Behavior & Organization, 2018
According to Alesina and Angeletos (2005), societies are less redistributive but more efficient when the median voter believes that effort and talent are much more important than luck to determine income. We test these results through a lab experiment in which participants vote over the tax rate and their pre-tax income is determined according to their performance in a real effort task with leisure time. Subjects receive either a high or a low wage and this condition is either obtained through their talent in a tournament or randomly assigned. We compare subjects' decisions in these two different scenarios considering different levels of wage inequality. In our framework, this initial income inequality turns out to be crucial to support the theoretical hypothesis of Alesina and Angeletos (2005). Overall, we find that, only if the wage inequality is high, subjects choose a lower level of income redistribution and they provide a higher effort level in the scenario in which high-wage subjects are selected based on their talent through a tournament (than when it is randomly). Thus, we confirm almost all theoretical results in Alesina and Angeletos (2005) when the wage inequality is high enough. The big exception is for efficiency (measured as the sum of total payoffs), since theoretical results only hold for the scenario in which wage inequality is low.
Individual notions of distributive justice and relative economic status
2011
We present two experiments designed to investigate whether individuals’ notions of distributive justice are associated with their relative (within-society) economic status. Each participant played a specially designed four-person dictator game under one of two treatments, under one initial endowments were earned, under the other they were randomly assigned. The first experiment was conducted in Oxford, United Kingdom, the second in Cape Town, South Africa. In both locations we found that relatively well-off individuals make allocations to others that reflect those others’ initial endowments more when those endowments were earned rather than random; among relatively poor individuals this was not the case.
Justice in the Shadow of Self-Interest. An Experiment on Redistributive Behavior
Acta Physica Polonica B, vol. 37, no. 11, 2006, pp. 2967-2977.
By means of laboratory experiment I examine the relation between fairness judgments made “behind the veil of ignorance” and actual behavior in a model situation of income inequality. As the evidence shows, when material self-interest is at stake vast majority of subjects tend to abandon the fairness norm. Rather small regard for efficiency is present in the data. Furthermore, as low income players go through a sequence of games against high earners and experience changes in income disparity, the history effect proves to override structural characteristics of the redistribution game.
Merit and Justice: An Experimental Analysis of Attitude to Inequality
PLoS ONE, 2014
Merit and justice play a crucial role in ethical theory and political philosophy. Some theories view justice as allocation according to merit; others view justice as based on criteria of its own, and take merit and justice as two independent values. We study experimentally how these views are perceived. In our experiment subjects played two games (both against the computer): a game of skill and a game of luck. After each game they observed the earnings of all the subjects in the session, and thus the differences in outcomes. Each subject could reduce the winnings of one other person at a cost. The majority of the subjects used the option to subtract. The decision to subtract and the amount subtracted depended on whether the game was one of skill or luck, and on the distance between the earnings of the subject and those of others. Everything else being equal, subjects subtracted more in luck than in skill. In skill game, but not in luck, the subtraction becomes more likely, and the amount larger, as the distance increases. The results show that individuals considered favorable outcomes in luck to be undeserved, and thus felt more justified in subtracting. In the skill game instead, they considered more favorable outcomes (their own as well as others') as signal of ability and perhaps effort, which thus deserved merit; hence, they felt less motivated to subtract. However, a larger size of the unfavorable gap from the others increased the unpleasantness of poor performance, which in turn motivated larger subtraction. In conclusion, merit is attributed if and only if effort or skill significantly affect the outcome. An inequality of outcomes is viewed differently depending on whether merit causes the difference or not. Thus, merit and justice are strongly linked in the human perception of social order.
Inequality poses one of the biggest challenges of our time. It is not self-correcting in the sense that citizens demand more redistributive measures in light of rising inequality, which recent studies suggest may be due to the fact that citizens' perceptions of inequality diverge from objective levels. Moreover, it is not the latter, but the former, which are related to preferences conducive to redistribution. However, the nascent literature on inequality perceptions has, so far, not accounted for the role of subjective position in society. The paper advances the argument that the relationship between inequality perceptions and preferences towards redistribution is conditional on the subjective position of respondents. To that end, I analyze comprehensive survey data on inequality perceptions from the social inequality module of the International Social Survey Programme (1992, 1999, and 2009). Results show that inequality perceptions are associated with preferences conducive to redistribution particularly among those perceived to be at the top of the social ladder. Gaining a better understanding of inequality perceptions contributes to comprehending the absence self-correcting inequality.
Perceptions of Inequality and Redistribution: A Note
Documents de Travail du Centre d'Economie de la Sorbonne, 2019
This paper shows that perceptions of inequality are a key factor in the formation of preferences for redistribution and thereby in the determination of the equilibrium redistribution level. We build on the novel stylized facts provided by the recent empirical and experimental literature on perceptions of income inequality. In brief, the emerging consensus is that agents incorrectly estimate the shape of the income distribution because of limited information. Agents with income above the mean believe they are poorer than they actually are, and agents with income below the mean believe themselves to be richer. We revisit the standard framework on the political economy of redistribution and extend it in two ways. First, we assume a more general two-sided inequality aversion. Second, we incorporate perceptions of income inequality in the model. We show analytically that the equilibrium redistribution level is crucially determined by the interplay between the information treatment correcting the bias in perceptions of inequality and fairness considerations specified by the degree of inequality aversion. By doing this, we add (biased) perceptions of inequality to the list of potential factors explaining why, notwithstanding high levels of inequality, in many countries, an increase in the desire for redistribution has not been observed.