Preferences for redistribution and pensions. What can we learn from experiments?
AbstractRedistribution is an inevitable feature of collective pension schemes. It is still largely an open question what peopleâs preferences are regarding redistributionâboth through pensions schemes as well as more generally. It would seem that economists have little to say about this question, as they routinely assume that people are predominantly selfish. Economic experiments have revealed, however, that most people do in fact have redistributional preferences that are not merely inspired by self-interest. This paper reviews this experimental evidence. For that purpose we distinguish between three fundamentally different types of situations. The first deals with distributional preferences behind a veil of ignorance. What type of income distribution do people prefer when they do not know whether they will end up in an advantaged or disadvantaged position? A main result here is that, contrary to what John Rawls suggested, people do not prefer the maximin rule, but rather favor a utilitarian justice concept appended with a safety net for the poorest. Another result is that people are willing to accept income inequalitiesâas long as these are due to choices for which people can be held accountable. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Experiments show that preferences for redistribution are strongly dependent on a personâs own position. People in a relatively disadvantaged position want more redistribution than those in a relatively advantaged position, which shows that preferences for redistribution are clearly affected by self-interest. Still, even many of those in an advantaged position display a preference forredistribution. This holds, in particular, if inequality is due to chance rather than effort. There are also significant differences in preferences between the genders and between people with different political orientations. Finally, we discuss situations in which income is det
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.
Volume (Year): 12 (2013)
Issue (Month): 03 (July)
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Other versions of this item:
- Tausch Franziska & Potters Jan & Riedl Arno, 2011. "Preferences for Redistribution and Pensions: What Can We Learn from Experiments?," Research Memorandum 014, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Tausch, Franziska & Potters, Jan & Riedl, Arno, 2010. "Preferences for Redistribution and Pensions: What Can We Learn from Experiments?," IZA Discussion Papers 5090, Institute for the Study of Labor (IZA).
- Franziska Tausch & Jan Potters & Arno Riedl, 2010. "Preferences for Redistribution and Pensions. What can we Learn from Experiments?," CESifo Working Paper Series 3156, CESifo Group Munich.
- Tausch Franziska & Potters Jan & Riedl Arno, 2010. "Preferences for Redistribution and Pensions: What Can We Learn from Experiments?," Research Memorandum 043, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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