On the relative deservingness of capital and labor

We study whether different factor inputs, capital and labor, are perceived as differentially deserving of their returns to production and the impact of such perceptions on support for redistributive policies. We develop an experimental paradigm to measure fundamental perceptions of distinct inputs’ deservingness, holding constant many factors that may justify differentially rewarding inputs in more natural environments. In representative samples of the U.S. and the Swiss populations, participants decide how to allocate production rewards between providers of work effort and financial investment. We find a tendency to perceive work as more deserving than investment, but also substantial individual heterogeneity. Behaviorally measured deservingness perceptions predict support for policies that differentially tax capital and labor and, in Switzerland, voting in a national referendum on capital taxation. We show that these relationships are independent of other fairness perceptions and economic and social considerations. Our work highlights the significance of notions of deservingness in shaping policy support.