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Preferences for Redistribution and Perception of Fairness: An Experimental Study

  • Ruben Durante
  • Louis Putterman

    (Department of Economics (Brown University))

This paper investigates the relative importance of fairness preferences, risk aversion, and selfinterest in determining support for redistribution. We present evidence from a series of laboratory experiments in which a large number of subjects choose the level of redistributive taxation to be applied to an initial distribution of endowments among participants. Our design permits us to investigate how support for redistribution varies based on: a) whether or not the decision-maker is part of the group affected by the tax; b) whether or not she has perfect information on her relative position in the distribution; c) whether or not the initial distribution is determined according to task performance; d) on the direct cost of redistribution to the decision-maker; e) on the deadweight loss associated with taxation. We find that: a) most subjects favor a more equal distribution among others; b) support for redistribution is sensitive to the cost of taxation and to the deadweight loss associated with it; c) risk aversion is associated with higher demand for redistribution when income is uncertain; d) subjects support less redistribution when the initial distribution is determined according to task performance. The last effect is much larger for males than for females and accounts for most of the gender-based difference in redistributive choices.

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Date of creation: Nov 2009
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Handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iatskih21
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  1. 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.
  2. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  3. Bénabou, Roland & Tirole, Jean, 2005. "Belief in a Just World and Redistributive Politics," CEPR Discussion Papers 4952, C.E.P.R. Discussion Papers.
  4. Konow, James, 2006. "Is Fairness in the Eye of the Beholder? An Impartial Spectator Analysis of Justice," MPRA Paper 2730, University Library of Munich, Germany.
  5. 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.
  6. 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.
  7. Engelmann Dirk & Strobel Martin, 2002. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," Research Memorandum 015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  8. 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.
  9. 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.
  10. 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.
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