IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/17234.html
   My bibliography  Save this paper

"Last-place Aversion": Evidence and Redistributive Implications

Author

Listed:
  • Ilyana Kuziemko
  • Ryan W. Buell
  • Taly Reich
  • Michael I. Norton

Abstract

Why do low-income individuals often oppose redistribution? We hypothesize that an aversion to being in "last place" undercuts support for redistribution, with low-income individuals punishing those slightly below themselves to keep someone "beneath" them. In laboratory experiments, we find support for "last-place aversion" in the contexts of risk aversion and redistributive preferences. Participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution. Similarly, in money- transfer games, those randomly placed in second-to-last place are the least likely to costlessly give money to the player one rank below. Last-place aversion predicts that those earning just above the minimum wage will be most likely to oppose minimum-wage increases as they would no longer have a lower-wage group beneath them, a prediction we confirm using survey data.

Suggested Citation

  • Ilyana Kuziemko & Ryan W. Buell & Taly Reich & Michael I. Norton, 2011. ""Last-place Aversion": Evidence and Redistributive Implications," NBER Working Papers 17234, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17234
    Note: LS PE POL
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w17234.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Simonson, Itamar, 1989. " Choice Based on Reasons: The Case of Attraction and Compromise Effects," Journal of Consumer Research, Oxford University Press, vol. 16(2), pages 158-174, September.
    2. Thorstein Veblen, 1899. "Mr. Cummings's Strictures on "The Theory of the Leisure Class"," Journal of Political Economy, University of Chicago Press, vol. 8, pages 106-106.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    4. Uri Gneezy & Jan Potters, 1997. "An Experiment on Risk Taking and Evaluation Periods," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 631-645.
    5. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
    6. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 73-92.
    7. David Card & Alexandre Mas & Enrico Moretti & Emmanuel Saez, 2012. "Inequality at Work: The Effect of Peer Salaries on Job Satisfaction," American Economic Review, American Economic Association, vol. 102(6), pages 2981-3003, October.
    8. Tyran, Jean-Robert, 2003. "Behavioral Game Theory. Experiments in Strategic Interaction: Colin F. Camerer, Princeton University Press, Princeton, New Jersey, 2003, p. 550, Price $65.00/[UK pound]42.95, ISBN 0-691-09039-4," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(6), pages 717-720, December.
    9. Jeffrey R. Kling & Jens Ludwig & Lawrence F. Katz, 2005. "Neighborhood Effects on Crime for Female and Male Youth: Evidence from a Randomized Housing Voucher Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 87-130.
    10. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    11. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    12. Metrick, Andrew, 1995. "A Natural Experiment in "Jeopardy!"," American Economic Review, American Economic Association, vol. 85(1), pages 240-253, March.
    13. Robert J. Oxoby, 2004. "Cognitive dissonance, status and growth of the underclass," Economic Journal, Royal Economic Society, vol. 114(498), pages 727-749, October.
    14. Daniel Aaronson, 2001. "Price Pass-Through And The Minimum Wage," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 158-169, February.
    15. Veblen, Thorstein, 2009. "The Theory of the Leisure Class," OUP Catalogue, Oxford University Press, number 9780199552580 edited by Banta, Martha.
    16. Fredrik Carlsson, 2010. "Design of Stated Preference Surveys: Is There More to Learn from Behavioral Economics?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(2), pages 167-177, June.
    17. Veblen, Thorstein, 1899. "The Theory of the Leisure Class," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number veblen1899.
    18. 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.
    19. Levy, Haim, 1994. "Absolute and Relative Risk Aversion: An Experimental Study," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 289-307, May.
    20. Leslie McCall & Lane Kenworthy, 2007. "Inequality, Public Opinion, and Redistribution," LIS Working papers 459, LIS Cross-National Data Center in Luxembourg.
    21. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
    22. Zhou, Rongrong & Soman, Dilip, 2003. " Looking Back: Exploring the Psychology of Queuing and the Effect of the Number of People Behind," Journal of Consumer Research, Oxford University Press, vol. 29(4), pages 517-530, March.
    23. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    24. Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-2149, December.
    25. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
    26. Garance Genicot & Debraj Ray, 2014. "Aspirations and Inequality," NBER Working Papers 19976, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard Murphy & Felix Weinhardt, 2014. "Top of the Class: The Importance of Ordinal Rank," CESifo Working Paper Series 4815, CESifo Group Munich.
    2. Esther Schüring & Franziska Gassmann, 2016. "The political economy of targeting – a critical review," Development Policy Review, Overseas Development Institute, vol. 34(6), pages 809-829, November.
    3. Rudolf Kerschbamer, 2013. "The Geometry of Distributional Preferences and a Non-Parametric Identification Approach," Working Papers 2013-25, Faculty of Economics and Statistics, University of Innsbruck.
    4. Schüring, Esther & Gassmann, Franziska, 2012. "Whom to target: an obvious choice?," MERIT Working Papers 028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Richard Murphy & Felix Weinhardt, 2013. "The Importance of Rank Position," CEP Discussion Papers dp1241, Centre for Economic Performance, LSE.

    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17234. 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: () or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.