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Redistribution and beliefs about the source of income inequality.

ABSTRACT: Previous literature demonstrates that beliefs about the determinants of income inequality play a major role in individual support for income redistribution. This study investigates how people form beliefs regarding the extent to which work versus luck determines income inequality. Specifically, I examine whether people form self-serving beliefs to justify supporting personally advantageous redistributive policies. I use a laboratory experiment where I directly measure beliefs and manipulate the incentives to engage in self-deception. I first replicate earlier results demonstrating that (1) people attribute income inequality to work when they receive a high income and to luck when they receive a low income and (2) their beliefs about the source of income inequality influence their preferences over redistributive policies. However, I do not find that people's beliefs about the causes of income inequality are further influenced by self-serving motivations based on a desire to justify favorable redistributive policies. I conclude that, in my experiment, self-serving beliefs about the causes of income inequality are driven primarily by overconfidence and self-image concerns and not to justify favorable redistributive policies.

Supplementary information

The online version contains supplementary material available at 10.1007/s10683-021-09733-8.

SUBMITTER: Valero V

PROVIDER: S-EPMC9165271 | biostudies-literature | 2022

REPOSITORIES: biostudies-literature

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Redistribution and beliefs about the source of income inequality.

Valero Vanessa V

Experimental economics 20210927 3

Previous literature demonstrates that beliefs about the determinants of income inequality play a major role in individual support for income redistribution. This study investigates how people form beliefs regarding the extent to which work versus luck determines income inequality. Specifically, I examine whether people form self-serving beliefs to justify supporting personally advantageous redistributive policies. I use a laboratory experiment where I directly measure beliefs and manipulate the ...[more]

PMID: 35673600

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Project description:The novel coronavirus is part of a series of infectious disease outbreaks that include: Ebola, Avian influenza, Middle East respiratory syndrome coronavirus, and Influenza A. This paper addresses the question of how do these epidemics and pandemics affect income inequality in countries around the world during the first two decades of this century. To achieve its objective, the paper develops a model that indicates a positive association between these health crises and income inequality. To empirically test our theoretical predictions, the paper explores the effect on the Gini coefficient of a dummy variable that indicates the occurrence of an epidemic or a pandemic in a country in a given year and the number of deaths per 100,000. To properly address potential endogeneity, we implement a Three-Stage-Least Squares technique. The estimation shows that the number of deaths per 100,000 population variable has a statistically significant positive effect on the Gini coefficient, especially when we incorporate COVID-19 data. This suggests that not only the occurrence, but also the health consequences of COVID-19 have a significant and economically important effect on income inequality.BackgroundThe purpose of the study is to examine the effect of epidemics and pandemics on income inequality. This has important implications as the outcome of this study can guide policymakers into implementing policies that can mitigate the economic consequences of these health crises.MethodsThe study is a cross country analysis using fixed effects estimation. To address potential endogeneity and determine causality, the paper uses the Three-Stage-Least-Squares estimation.ResultsThe paper finds that the number of epidemic deaths per 100,000 population variable has a statistically significant positive effect on the Gini coefficient, especially when we incorporate COVID-19 data.ConclusionsThe paper finds that it is not only the occurrence of an epidemic, captured by the epidemics dummy variable, but also the health consequences, captured by the number of deaths per 100,000 population, that have a significant effect on income inequality. This is especially the case when we incorporate COVID-19 in our analysis.Trial registrationNot Applicable.

Dataset Information

Redistribution and beliefs about the source of income inequality.

Supplementary information

Publications

Redistribution and beliefs about the source of income inequality.

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