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Inequality and Relative Ability Beliefs

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  • Jeffrey V. Butler

Abstract

In this study I present experimental evidence of a novel channel yielding inequality persistence. In an initial experiment, results suggest that individuals respond to salient inequality by adjusting their performance beliefs to justify the inequality. Subsequent experiments reveal: i) that it is beliefs about relative ability, an ostensibly stable trait, rather than effort provision that respond to inequality; and that ii) unequal pay in an initial task affects willingness to compete on a subsequent task for male participants. Taken together, these patterns may cause inequality to become self-perpetuating. I conclude by discussing some implications of these findings.
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Suggested Citation

  • Jeffrey V. Butler, 2016. "Inequality and Relative Ability Beliefs," Economic Journal, Royal Economic Society, vol. 126(593), pages 907-948, June.
  • Handle: RePEc:wly:econjl:v:126:y:2016:i:593:p:907-948
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    File URL: http://hdl.handle.net/10.1111/ecoj.2016.126.issue-593
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    References listed on IDEAS

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    1. Grossman, Zachary & Owens, David, 2012. "An unlucky feeling: Overconfidence and noisy feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 510-524.
    2. Caroline Hoxby & Christopher Avery, 2013. "The Missing "One-Offs": The Hidden Supply of High-Achieving, Low-Income Students," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 1-65.
    3. Grossman, Zachary & Owens, David, 2012. "An unlucky feeling: Overconfidence and noisy feedback," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 510-524.
    4. Uri Gneezy & Kenneth L. Leonard & John A. List, 2009. "Gender Differences in Competition: Evidence From a Matrilineal and a Patriarchal Society," Econometrica, Econometric Society, vol. 77(5), pages 1637-1664, September.
    5. David Eil & Justin M. Rao, 2011. "The Good News-Bad News Effect: Asymmetric Processing of Objective Information about Yourself," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 114-138, May.
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    Cited by:

    1. Ifcher, John & Zarghamee, Homa & Graham, Carol Lee, 2016. "Income Inequality and Well-Being in the U.S.: Evidence of Geographic-Scale- and Measure-Dependence," IZA Discussion Papers 10155, Institute for the Study of Labor (IZA).
    2. Norma Burow & Miriam Beblo & Denis Beninger & Melanie Schröder, 2017. "Why Do Women Favor Same-Gender Competition? Evidence from a Choice Experiment," Discussion Papers of DIW Berlin 1662, DIW Berlin, German Institute for Economic Research.

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