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Richer (and Holier) Than Thou? The Effect of Relative Income Improvements on Demand for Redistribution

Author

Listed:
  • Mounir Karadja

    (Department of Economics, Uppsala University)

  • Johanna Mollerstrom

    (Humboldt University and German Institute for Economic Research (DIW), Berlin, and Research Institute of Industrial Economics, Stockholm)

  • David Seim

    (Department of Economics, Stockholm University, CEPR, and Research Institute of Industrial Economics, Stockholm)

Abstract

We use a tailor-made survey on a Swedish sample to investigate how individuals' relative income affects their demand for redistribution. We first document that a majority misperceive their position in the income distribution and believe that they are poorer, relative to others, than they actually are. We then inform a subsample about their true relative income and find that individuals who are richer than they initially thought demand less redistribution. This result is driven by individuals with prior right-of-center political preferences who view taxes as distortive and believe that effort, rather than luck, drives individual economic success.

Suggested Citation

  • Mounir Karadja & Johanna Mollerstrom & David Seim, 2017. "Richer (and Holier) Than Thou? The Effect of Relative Income Improvements on Demand for Redistribution," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 201-212, May.
    • Handle: RePEc:tpr:restat:v:99:y:2017:i:2:p:201-212
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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