The experiment I aim to present at the XXII AECPA Congress seeks to depict the causal impact of the source of income inequality on preferences for redistribution, showing the impact of fairness considerations on these preferences. Additionally it aims to test how these preferences might change depending on the level of pre-distribution inequality.

There has been an extensive debate on which are the causal factors that determine citizens’ support for redistribution, and many potential causes have been identified. Self-interest has had a predominant position in economics, especially following the Meltzer-Richard model (Meltzer and Richard, 1981). Additionally, whether poverty is regarded as due to causes outside individuals’ control or not has been considered one of the main factors in generating preferences for redistribution (Alesina and Angeletos, 2003, Pikketty, 1995). In this experiment I aim to depict the different attitude towards redistribution that people have depending on whether they consider the initial inequality as a consequence of individual merit, of luck or of unfair social circumstances.

The experiment will be a lab experiment in which participants will receive different payments based on different criteria (luck, merit, injustice). They will have the chance to choose a tax rate for each circumstance so that they can reduce the initial inequality. I will test whether the preferred tax rates change if the origin of inequality mobilises or on another fairness principle. Participants will make the choice three times, under different conditions: as an unaffected decisions-maker, as an affected decision-maker without knowing their position in the inequality structure and as an affected decision maker knowing such position. Thus we will be able to scrutinize the effect of risk and self-interest in the preferred tax rate. Finally, the impact of the level of inequality will be tests by randomly assigning participants to one of two possible inequality structures.

I expect to find that self-interest plays an important role. However, variations on the level of redistribution chosen will vary depending on fairness considerations and the inequality levels. I forecast higher taxes in unjust conditions treatments and lower on the merit treatment. Similarly, I expect higher redistribution on the high inequality treatment.

References:

Alesina, Alberto, and George-Marios Angeletos. Fairness and redistribution: US versus Europe. No. w9502. National Bureau of Economic Research, 2003.

Meltzer, Allan H., and Scott F. Richard. "A rational theory of the size of government." The Journal of Political Economy (1981): 914-927.

Piketty, Thomas. "Social mobility and redistributive politics." The Quarterly journal of economics (1995): 551-584.