Preferences For Redistribution and Perception of Fairness: An Experimental Study
Why is there significant political support for progressive taxation and equalizing government transfers in western democracies? Possibilities include individual socail preferences for a less unequal distribution than what market forces alone would dictate, demand for social insurance, or successful political coalitions to redistribute away from the rich. We study the relative importance of fairness preferences, risk aversion, and self-interest in determining support for redistribution through a set of experiments in which a large number of subjects are asked to choose what level of taxation to implement under different decision conditions and with four alternative determinants of pre-tax income (two task-based, one random, and one based on socio-economic background). Treatments using varying costs of redistribution to the decision-maker and efficiency losses to recipients are used to study willingness to pay for redistribution and concern for aggregate inefficiency. Most of our subjects prefer that there be less inequality among others and demand for redistribution responds in predictable ways to the cost of taxation and to the dead-weigh loss associated with it. The external validity of the experiment is supported by the high correlation between tax decisions and political preferences. We also find evidence that preferred levels of redistribution are highly responsive to whether pre-tax incomes are determined according to task performance, a trend that is much more evident among men than among woman. Comparisons between redistributive choices under different experimental conditinos provide interesting insights with regard to the relative importance of inequality aversion and self-interest when choosing under uncertainty and when uncertainty is resolved. In the first case, individuals expectation about their future position in the income distribution has a considerable impact on their tax choices. When sure of the effect on their own earnings, subjects tax choices are primarily goverened by self-interest, but fairness preferences continue to play a role.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Brown University, Providence, RI 02912|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Konow, James, 2006.
"Is Fairness in the Eye of the Beholder? An Impartial Spectator Analysis of Justice,"
2730, University Library of Munich, Germany.
- James Konow, 2009. "Is fairness in the eye of the beholder? An impartial spectator analysis of justice," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 33(1), pages 101-127, June.
- Bénabou, Roland & Tirole, Jean, 2005.
"Belief in a Just World and Redistributive Politics,"
CEPR Discussion Papers
4952, C.E.P.R. Discussion Papers.
- Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 699-746.
- Jean Tirole & Roland Bénabou, 2006. "Belief in Just World and Redistributive Politics," Post-Print hal-00173678, HAL.
- Jean Tirole & Roland Benabou, 2004. "Belief in a Just World and Redistributive Politics," 2004 Meeting Papers 15, Society for Economic Dynamics.
- Roland Benabou & Jean Tirole, 2005. "Belief in a Just World and Redistributive Politics," NBER Working Papers 11208, National Bureau of Economic Research, Inc.
- Benabou, Roland & Tirole, Jean, 2004. "Belief in a Just World and Redistributive Politics," Papers 08-15-2005a, Princeton University, Research Program in Political Economy.
- Fong, Christina M. & Luttmer, Erzo F.P., 2011.
"Do fairness and race matter in generosity? Evidence from a nationally representative charity experiment,"
Journal of Public Economics,
Elsevier, vol. 95(5-6), pages 372-394, June.
- Fong, Christina M. & Luttmer, Erzo F.P., 2011. "Do fairness and race matter in generosity? Evidence from a nationally representative charity experiment," Journal of Public Economics, Elsevier, vol. 95(5), pages 372-394.
- Charness, Gary & Rabin, Matthew, 2001.
"Understanding Social Preferences with Simple Tests,"
Department of Economics, Working Paper Series
qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
- Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
- Charness, Gary & Rabin, Matthew, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt3d04q5sm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
- Engelmann Dirk & Strobel Martin, 2002.
"Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments,"
015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
- Tyran, Jean-Robert & Sausgruber, Rupert, 2006.
"A little fairness may induce a lot of redistribution in democracy,"
European Economic Review,
Elsevier, vol. 50(2), pages 469-485, February.
- Jean-Robert Tyran & Rupert Sausgruber, 2002. "A Little Fairness may Induce a Lot of Redistribution in Democracy," University of St. Gallen Department of Economics working paper series 2002 2002-30, Department of Economics, University of St. Gallen.
- Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
- John H. Beck, 1994. "An Experimental Test of Preferences for the Distribution of Income and Individual Risk Aversion," Eastern Economic Journal, Eastern Economic Association, vol. 20(2), pages 131-145, Spring.
- Krawczyk, Michal, 2010. "A glimpse through the veil of ignorance: Equality of opportunity and support for redistribution," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 131-141, February.
When requesting a correction, please mention this item's handle: RePEc:bro:econwp:2007-13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Brown Economics Webmaster)
If references are entirely missing, you can add them using this form.