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Social Preferences and Voting on Reform: An Experimental Study

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  • Fabian Paetzel

    ()
    (Centre for Social Policy Research, University of Bremen)

  • Rupert Sausgruber

    ()
    (Department of Economics, Vienna University of Economics and Business)

  • Stefan Traub

    ()
    (Centre for Social Policy Research, University of Bremen)

Abstract

Debating over efficiency-enhancing but inequality-increasing reforms accounts for the routine business of democratic institutions. Fernandez and Rodrik (1991) hold that anti-reform bias can be attributed to individual-specific uncertainty regarding the distribution of gains and losses resulting from a reform. In this paper, we experimentally demonstrate that anti-reform bias arising from uncertainty is mitigated by social preferences. We show that, paradoxically, many who stand to lose from reforms vote in favor because they value efficiency, while many who will potentially gain from reforms oppose them due to inequality aversion.

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Bibliographic Info

Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp172.

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Date of creation: Apr 2014
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Handle: RePEc:wiw:wiwwuw:wuwp172

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Related research

Keywords: Political economy of reform; Status quo bias; Social preferences; Voting; Experiment;

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References

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  1. Wolfgang Höchtl & Rupert Sausgruber & Jean-Robert Tyran, 2011. "Inequality Aversion and Voting on Redistribution," Discussion Papers 11-18, University of Copenhagen. Department of Economics.
  2. 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).
  3. Tyran, Jean-Robert & Sausgruber, Rupert, 2006. "A little fairness may induce a lot of redistribution in democracy," European Economic Review, Elsevier, Elsevier, vol. 50(2), pages 469-485, February.
  4. Engelmann,Dirk & Strobel,Martin, 2002. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," Research Memorandum, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) 015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  5. Sanjay Jain & Sharun W. Mukand, 2003. "Redistributive Promises and the Adoption of Economic Reform," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 256-264, March.
  6. Ben Greiner, 2004. "The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics," Working Paper Series in Economics, University of Cologne, Department of Economics 10, University of Cologne, Department of Economics.
  7. Schmidt, Klaus M., 2009. "Social Preferences and Competition," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 298, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(3), pages 817-869, August.
  9. Traub, Stefan & Seidl, Christian & Schmidt, Ulrich, 2009. "An experimental study on individual choice, social welfare, and social preferences," European Economic Review, Elsevier, Elsevier, vol. 53(4), pages 385-400, May.
  10. Loukas Balafoutas & Rudolf Kerschbamer & Matthias Sutter, 2011. "Distributional Preferences and Competitive Behavior," Working Papers, Faculty of Economics and Statistics, University of Innsbruck 2011-04, Faculty of Economics and Statistics, University of Innsbruck.
  11. Tommasi, Mariano & Velasco, Andres, 1995. "Where are we in the Political Economy of Reform?," Working Papers, C.V. Starr Center for Applied Economics, New York University 95-20, C.V. Starr Center for Applied Economics, New York University.
  12. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, Econometric Society, vol. 60(4), pages 803-36, July.
  13. Steven R. Beckman & Buhong Zheng & John P. Formby & W. James Smith, 2002. "Envy, malice and Pareto efficiency: An experimental examination," Social Choice and Welfare, Springer, Springer, vol. 19(2), pages 349-367.
  14. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 817-868, August.
  15. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 166-193, March.
  16. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
  17. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1644-1655, December.
  18. Charles A. Holt & Susan K. Laury, 2005. "Risk Aversion and Incentive Effects: New Data without Order Effects," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 902-912, June.
  19. 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.
  20. Schmidt, Klaus M., 2011. "Social preferences and competition," Munich Reprints in Economics, University of Munich, Department of Economics 19766, University of Munich, Department of Economics.
  21. Ben Greiner, 2004. "The Online Recruitment System ORSEE - A Guide for the Organization of Experiments in Economics," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2003-10, Max Planck Institute of Economics, Strategic Interaction Group.
  22. Raymond Fisman & Shachar Kariv & Daniel Markovits, 2007. "Individual Preferences for Giving," American Economic Review, American Economic Association, American Economic Association, vol. 97(5), pages 1858-1876, December.
  23. Moses Shayo & Alon Harel, 2010. "Non-Consequentialist Voting," Discussion Paper Series, The Center for the Study of Rationality, Hebrew University, Jerusalem dp545, The Center for the Study of Rationality, Hebrew University, Jerusalem.
  24. Vai-Lam Mui & Timothy N. Cason, 2004. "Uncertainty and Resistance to Reform in Laboratory Participation Games," Econometric Society 2004 Australasian Meetings, Econometric Society 1, Econometric Society.
  25. Shayo, Moses & Harel, Alon, 2012. "Non-consequentialist voting," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 81(1), pages 299-313.
  26. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, Springer, vol. 10(2), pages 171-178, June.
  27. Timothy N. Cason & Vai-Lam Mui, 2003. "Testing Political Economy Models of Reform in the Laboratory," American Economic Review, American Economic Association, American Economic Association, vol. 93(2), pages 208-212, May.
  28. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1146-55, December.
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