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Equality, equity and incentives: An experiment

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

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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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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