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

Author

Listed:
  • Mounir Karadja

    () (Institute of International Economic Studies, Stockholm University)

  • Johanna Mollerstrom

    () (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

  • David Seim

    () (Department of Economics, University of Toronto)

Abstract

We study the extent to which people are misinformed about their relative position in the income distribution and the effects on preferences for redistribution of correcting faulty beliefs. We implement a tailor-made survey in Sweden and document that a vast majority of Swedes believe that they are poorer, relative to others, than they actually are. This is true across groups, but younger, poorer, less cognitively able and less educated individuals have perceptions that are further from reality. Using a second survey, we conduct an experiment by randomly informing a subsample about their true relative income position. Respondents who learn that they are richer than they thought demand less redistribution and increase their support for the Conservative Party. This result is entirely driven by prior right-of-center political preferences and not by altruism or moral values about redistribution. Moreover, the effect can be reconciled by people with political preferences to the right-of-center being more likely to view taxes as distortive and believe that it is personal effort rather than luck that is most influential for individual economic success. Length: 48

Suggested Citation

  • Mounir Karadja & Johanna Mollerstrom & David Seim, 2014. "Richer (and Holier) than Thou? The Effect of Relative Income Improvements on Demand for Redistribution," Working Papers 1050, George Mason University, Interdisciplinary Center for Economic Science.
  • Handle: RePEc:gms:wpaper:1050
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Carina Engelhardt & Andreas Wagener, 2016. "What do Germans think and know about income inequality? A survey experiment," Working Papers 389, ECINEQ, Society for the Study of Economic Inequality.
    2. Berggren, Niclas & Nilsson, Therese, 2016. "Tolerance in the United States: Does economic freedom transform racial, religious, political and sexual attitudes?," European Journal of Political Economy, Elsevier, vol. 45(S), pages 53-70.
    3. Sera Linardi & Nita Rudra, 2015. "Globalization and Redistribution Towards the Poor in Developing Countries: Experimental Evidence from India," Artefactual Field Experiments 00399, The Field Experiments Website.
    4. Christopher Roth & Johannes Wohlfart, 2016. "Experienced Inequality and Preferences for Redistribution," CESifo Working Paper Series 6251, CESifo Group Munich.
    5. repec:eee:pubeco:v:153:y:2017:i:c:p:49-55 is not listed on IDEAS
    6. Bublitz, Elisabeth, 2016. "Misperceptions of income distributions: Cross-country evidence from a randomized survey experiment," HWWI Research Papers 178, Hamburg Institute of International Economics (HWWI).
    7. Grigorieff, Alexis & Roth, Christopher & Ubfal, Diego, 2016. "Does Information Change Attitudes Towards Immigrants? Representative Evidence from Survey Experiments," IZA Discussion Papers 10419, Institute for the Study of Labor (IZA).
    8. Nicolas L. Bottan & Ricardo Perez-Truglia, 2017. "Choosing Your Pond: Location Choices and Relative Income," NBER Working Papers 23615, National Bureau of Economic Research, Inc.
    9. Yamamura, Eiji & Ishida, Ryo, 2017. "Analysis of the implementation of information disclosure ordinances in Japan: the effect on the income of mayors and chief executives in local governments," MPRA Paper 83337, University Library of Munich, Germany.
    10. Jacob Gerner Hariri & Christian Bjørnskov & Mogens K. Justesen, 2016. "Economic Shocks and Subjective Well-Being: Evidence from a Quasi-Experiment," World Bank Economic Review, World Bank Group, vol. 30(1), pages 55-77.

    More about this item

    Keywords

    fairness; responsibility; option luck; brute luck; experiment;

    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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