Experienced Inequality and Preferences for Redistribution

Category: Money and Macro Brown Bag Seminar
When: 20 October 2016
, 12:00
 - 13:00
Where: Singapore (HoF 1.29)
Speaker: Johannes Wohlfart (Goethe University Frankfurt)

We examine in how far people’s experiences of income inequality affect their preferences for redistribution. We use several large nationally representative datasets and provide evidence that people with higher levels of inequality experience are less in favor of redistribution, after controlling for income, demographics, unemployment experiences and current macro-economic conditions. Moreover, we show that people with experiences of higher inequality believe that success in life depends on effort rather than luck and are more likely to believe that inequality increases motivation. Importantly, they are also less likely to consider the prevailing distribution of incomes to be unfair, suggesting that inequality experiences act as reference points about what is a fair division of resources. Finally, we conduct an online experiment to show that individuals randomly exposed to environments with higher inequality in the first stage of the experiment redistribute less in a subsequent behavioral measure.

Link to the paper: