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Equality, equity and incentives: An experiment

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  • Balafoutas, Loukas
  • Kocher, Martin G.
  • Putterman, Louis
  • Sutter, Matthias

Abstract

We study a fundamental conflict in economic decision-making, the trade-off between equality, equity and incentives, in a new experimental game that nests a voluntary contributions mechanism in a broader spectrum of incentive schemes. In a 2×2 design, we let subjects either vote on or exogenously encounter incentive settings while assigned unequal endowments are either task-determined or random. We find that earned endowments lead to less support for redistribution and less cooperation. Subjects' voting is influenced by egalitarian and equity concerns, in addition to self-interest. Cooperation rates respond rather continuously to incentives.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 60 (2013)
Issue (Month): C ()
Pages: 32-51

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Handle: RePEc:eee:eecrev:v:60:y:2013:i:c:p:32-51

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Equality; Efficiency; Incentives; Voluntary contribution mechanism; Experiment;

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Cited by:
  1. Großer, Jens & Reuben, Ernesto, 2013. "Redistribution and market efficiency: An experimental study," Journal of Public Economics, Elsevier, vol. 101(C), pages 39-52.
  2. Ku, Hyejin & Salmon, Timothy C., 2013. "Procedural fairness and the tolerance for income inequality," European Economic Review, Elsevier, vol. 64(C), pages 111-128.
  3. Oechssler, Jörg, 2011. "Finitely repeated games with social preferences," Working Papers 0515, University of Heidelberg, Department of Economics.
  4. R. Kline & F. Galeotti & R. Orsini, 2014. "When Foul Play Seems Fair: Dishonesty as a Response to Violations of Just Deserts," Working Papers wp920, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Weng, Qian & Carlsson, Fredrik, 2013. "Cooperation in teams: the role of identity, punishment and endowment distribution," Working Papers in Economics 551, University of Gothenburg, Department of Economics.
  6. Annarita COLASANTE & Alberto RUSSO, 2014. "The Impact of Inequality on Cooperation: An Experimental Study," Working Papers 401, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  7. Neil Buckley & Katherine Cuff & Jeremiah Hurley & Stuart Mestelman & Stephanie Thomas & David Cameron, 2013. "Support for Public Provision with Top-Up and Opt-Out: A Controlled Laboratory Experiment," Department of Economics Working Papers 2013-15, McMaster University.

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