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Preferences for Redistribution and Perception of Fairness: An Experimental Study

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  • Louis Putterman
  • Ruben Durante

Abstract

This paper investigates the relative importance of fairness preferences, risk aversion, and selfinterest in determining support for redistribution. We present evidence from a series of laboratory experiments in which a large number of subjects choose the level of redistributive taxation to be applied to an initial distribution of endowments among participants. Our design permits us to investigate how support for redistribution varies based on: a) whether or not the decision-maker is part of the group affected by the tax; b) whether or not she has perfect information on her relative position in the distribution; c) whether or not the initial distribution is determined according to task performance; d) on the direct cost of redistribution to the decision-maker; e) on the deadweight loss associated with taxation. We find that: a) most subjects favor a more equal distribution among others; b) support for redistribution is sensitive to the cost of taxation and to the deadweight loss associated with it; c) risk aversion is associated with higher demand for redistribution when income is uncertain; d) subjects support less redistribution when the initial distribution is determined according to task performance. The last effect is much larger for males than for females and accounts for most of the gender-based difference in redistributive choices.

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Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/eu4vqp9ompqllr09iatskih21.

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Date of creation: Nov 2009
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Handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iatskih21

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  1. Fong, Christina M. & Luttmer, Erzo F.P., 2011. "Do fairness and race matter in generosity? Evidence from a nationally representative charity experiment," Journal of Public Economics, Elsevier, vol. 95(5), pages 372-394.
  2. Tyran, Jean-Robert & Sausgruber, Rupert, 2006. "A little fairness may induce a lot of redistribution in democracy," European Economic Review, Elsevier, vol. 50(2), pages 469-485, February.
  3. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
  4. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  5. Benabou, Roland & Tirole, Jean, 2004. "Belief in a Just World and Redistributive Politics," Papers 08-15-2005a, Princeton University, Research Program in Political Economy.
  6. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. Konow, James, 2006. "Is Fairness in the Eye of the Beholder? An Impartial Spectator Analysis of Justice," MPRA Paper 2730, University Library of Munich, Germany.
  8. Krawczyk, Michal, 2010. "A glimpse through the veil of ignorance: Equality of opportunity and support for redistribution," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 131-141, February.
  9. Lucy F. Ackert & Jorge Martinez-Vazquez & Mark Rider, 2007. "Social Preferences And Tax Policy Design: Some Experimental Evidence," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 487-501, 07.
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