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The Effect of Initial Inequality on Meritocracy. A Voting Experiment on Tax Redistribution

Author

Listed:
  • Natalia Jiménez Jiménez

    () (Departamento de Economía, Métodos Cuantitativos e Historia Económica, University Pablo de Olavide.)

  • Elena Molis

    () (Department of Economic Theory and Economic History, University of Granada.)

  • Ángel Solano García

    () (Department of Economic Theory and Economic History, University of Granada.)

Abstract

According to Alesina and Angeletos (2005), societies are less redistributive but more efficient when the median voter believes that effort and talent are much more important than luck to determine income. We test these results through a lab experiment in which participants vote over the tax rate and their pre-tax income is determined according to their performance in a real effort task with leisure time. Subjects receive either a high or a low wage and this condition is either obtained through their talent in a tournament or randomly assigned. We compare subjects' decisions in these two different scenarios considering different levels of wage inequality. In our framework, this initial income inequality turns out to be crucial to support the theoretical hypothesis of Alesina and Angeletos (2005). Overall, we find that, only if the wage inequality is high, subjects choose a lower level of income redistribution and they provide a higher effort level in the scenario in which high-wage subjects are selected based on their talent through a tournament (than when it is randomly). Thus, we confirm almost all theoretical results in Alesina and Angeletos (2005) when the wage inequality is high enough. The big exception is for efficiency (measured as the sum of total payoffs), since theoretical results only hold for the scenario in which wage inequality is low.

Suggested Citation

  • Natalia Jiménez Jiménez & Elena Molis & Ángel Solano García, "undated". "The Effect of Initial Inequality on Meritocracy. A Voting Experiment on Tax Redistribution," ThE Papers 18/01, Department of Economic Theory and Economic History of the University of Granada..
  • Handle: RePEc:gra:wpaper:18/01
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    References listed on IDEAS

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    1. Lee, Woojin & Roemer, John E., 2006. "Racism and redistribution in the United States: A solution to the problem of American exceptionalism," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1027-1052, August.
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    More about this item

    Keywords

    income redistribution; voting; taxation; real-effort task; leisure.;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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