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The anatomy of distributional preferences with group identity

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  • Müller, Daniel

Abstract

The increasing diversity of societies raises questions about the consequences for redistributive preferences. This paper assesses the impact of social identity on distributional preferences in a modified dictator game. I estimate individual-level utility functions with two parameters that govern the trade-offs between equity and efficiency and giving to self and to other. Subjects on average put less weight on income of the out-group. The out-group treatment also changes the distribution of equity-efficiency concerns. However, the experiment also uncovers a large individual heterogeneity of preferences. An analysis of GARP violations reveals that choices in both treatments overwhelmingly stem from well-behaved, yet systematically different underlying utility functions. Hence, the evidence presented here suggests that the rational choice approach is a useful tool for understanding the effect of social identity on preferences.

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  • Müller, Daniel, 2019. "The anatomy of distributional preferences with group identity," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 785-807.
  • Handle: RePEc:eee:jeborg:v:166:y:2019:i:c:p:785-807
    DOI: 10.1016/j.jebo.2019.09.009
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    Keywords

    Social identity; Inequality; Distributional preferences; GARP; Rationality; In-group–outgroup bias;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H80 - Public Economics - - Miscellaneous Issues - - - General

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