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Identity and Redistribution: Theory and Evidence

Author

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  • Sanjit Dhami

    ()

  • Emma Manifold

    ()

  • Ali al-Nowaihi

    ()

Abstract

We contribute to a growing literature on redistribution and identity. We propose a theoretical model that embeds social identity concerns, as in Akerlof and Kranton (2000), with inequity averse preferences, as in Fehr and Schmidt (1999). We conduct an artefactual ultimatum game experiment with registered members of British political parties for whom both identity and redistribution are salient. The empirical results are as follows. (1) Proposers and responders demonstrate ingroup-favoritism. (2) Proposers exhibit quantitatively stronger social identity effects relative to responders. (3) As redistributive taxes increase, offers by proposers and the minimum acceptable offers of responders (both as a proportion of income) decline by almost the same amount, suggesting a shared understanding that is characteristic of social norms. (4) Subjects experience more disadvantageous inequity from outgroup members relative to ingroup members.

Suggested Citation

  • Sanjit Dhami & Emma Manifold & Ali al-Nowaihi, 2019. "Identity and Redistribution: Theory and Evidence," Discussion Papers in Economics 19/04, Division of Economics, School of Business, University of Leicester.
  • Handle: RePEc:lec:leecon:19/04
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    References listed on IDEAS

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    Cited by:

    1. Sanjit Dhami & Narges Hajimoladarvish, 2020. "Mental Accounting, Loss Aversion, and Tax Evasion: Theory and Evidence," CESifo Working Paper Series 8606, CESifo.

    More about this item

    Keywords

    Social identity; prosocial behaviour; ultimatum game; fiscal redistribution; entitlements;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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