Distributional Preferences in Larger Groups: Keeping up with the Joneses and Keeping Track of the Tails

Abstract

We study distributional preferences in larger “societies.” We conduct experiments via Mechanical Turk, in which subjects choose between two income distributions, each with seven (or more) individuals, with hypothetical incomes that aim to approximate the actual distribution of income in the U.S. In contrast to prior work, our design allows us to flexibly capture the particular distributional concerns of subjects. Consistent with standard maximin (Rawlsian) preferences, subjects select distributions in which the bottom individual’s income is higher (but show little regard for lower incomes above the bottom ranking). In contrast to standard models, however, we find that subjects select distributions that lower the top individual’s income, but not other high incomes. Finally, we provide evidence of “locally competitive” preferences—in most experimental sessions, subjects select distributions that lower the income of the individual directly above them, while the income of the individual two positions above has little effect on subjects’ decisions. Our findings suggest that theories of inequality aversion should be adapted to account for individuals’ aversion to “topmost” and “local” disadvantageous inequality.

Preferences for income redistribution: a new survey item and experimental evidence

“…In closely related research, Fisman et al (2021) elicit distributional preferences by means of pairwise comparisons between hypothetical income distributions that are anchored on the current distribution in the U.S. Their research identifies the features of income distributions that are most relevant to distributional preferences. A key aspect of their approach is that it asks respondents to imagine themselves at different ranks of the income distribution.…”

“…Such platforms let task owners pay individuals to carry out jobs, which include responding to surveys or dividing payoffs between other workers (e.g. Charité et al, 2015;Cohn et al, 2019;Almås et al, 2020;Fisman et al, 2021). While they allow for quick data collection and thus afford flexibility to run follow-up experiments, participation is based on self-selection.…”

“…Recent trends in inequality, intergenerational mobility, and migration have reinvigorated this research (e.g. Kuziemko et al, 2015;Alesina et al, 2018bAlesina et al, , 2019Alesina et al, , 2020Fisman et al, 2021).…”

“…Previous studies often do not mention how redistribution would be achieved (e.g. Fisman et al, 2021) and many individuals do not make the connection between inequality concerns and government policy intended to reduce inequality (Kuziemko et al, 2015). The new survey item focuses on taxation, since income tax is primarily redistributive.…”

Social Position and Fairness Views

“…Charité et al (2015) point out the importance of reference points, while we highlight the need to consider specific reference groups. Fisman et al (2020) show that people care about inequality in a non-linear way relative to their own position, putting weight both on their nearest neighbors and on the top of the distribution. Using online surveys, Weinzierl (2014) demonstrates that people do not hold utilitarian preferences, but rather have other, mixed fairness views.…”