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"Last-place Aversion": Evidence and Redistributive Implications

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  • Ilyana Kuziemko
  • Ryan W. Buell
  • Taly Reich
  • Michael I. Norton
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    Abstract

    Why do low-income individuals often oppose redistribution? We hypothesize that an aversion to being in "last place" undercuts support for redistribution, with low-income individuals punishing those slightly below themselves to keep someone "beneath" them. In laboratory experiments, we find support for "last-place aversion" in the contexts of risk aversion and redistributive preferences. Participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution. Similarly, in money- transfer games, those randomly placed in second-to-last place are the least likely to costlessly give money to the player one rank below. Last-place aversion predicts that those earning just above the minimum wage will be most likely to oppose minimum-wage increases as they would no longer have a lower-wage group beneath them, a prediction we confirm using survey data.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17234.

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    Date of creation: Jul 2011
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    Publication status: published as Kuziemko, I., R. Buell, T. Reich, and M. Norton “Last-place Aversion: Evidence and Redistributive Implications,” Quarterly Journal of Economics (forthcoming)
    Handle: RePEc:nbr:nberwo:17234

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    Cited by:
    1. Rudolf Kerschbamer, 2013. "The Geometry of Distributional Preferences and a Non-Parametric Identification Approach," Working Papers 2013-25, Faculty of Economics and Statistics, University of Innsbruck.
    2. Richard Murphy & Felix Weinhardt, 2014. "Top of the Class: The Importance of Ordinal Rank," CESifo Working Paper Series 4815, CESifo Group Munich.
    3. Richard Murphy & Felix Weinhardt, 2013. "The Importance of Rank Position," CEP Discussion Papers dp1241, Centre for Economic Performance, LSE.
    4. Schüring, Esther & Gassmann, Franziska, 2012. "Whom to target: an obvious choice?," MERIT Working Papers 028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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