The Consequences of Inequality: Beliefs and Redistributive Preferences with Morten Støstad
Working Paper, Revise and Resubmit at The American Economic Review
Abstract: Using two large-scale studies in the United States we document widespread public agreement that inequality leads to negative societal consequences, for example by increasing crime (74 %), harming democratic institutions (57 %), and weakening economic growth (52 %). An information experiment establishes causal evidence that such inequality externality beliefs substantially influence redistributive preferences, with an importance approaching that of economic fairness views. Inequality externality beliefs are less polarized across income levels and political affiliations than fairness views, and have a particularly strong influence on high-income individuals. Our results demonstrate that these previously undocumented beliefs constitute a key determinant of redistributive preferences.
Motivating Beliefs in a Just World
Abstract: This paper studies whether individuals distort their beliefs about the relative importance of effort and luck to motivate themselves to exert effort. To that end, I develop a novel experimental design where past experience of success or failure serves as a noisy signal about the true importance of effort in achieving success. To test whether individuals distort their beliefs to motivate future effort, I vary the moment in time when subjects are informed about an effortful task to be performed later in the experiment. Subjects who receive the information before belief elicitation face an incentive to distort their beliefs to motivate effort in the later task. The results show that such individuals are more likely to believe that their effort is important for success. Motivating belief distortion is particularly pronounced for subjects who receive disincentivizing news about the true state of the world, i.e. that success depends on luck rather than on effort. I additionally test whether motivating belief distortion affects subjects' willingness to distribute money between two other individuals as a third-party spectator. I find no evidence that distributive behavior differs across the two treatment groups. These results suggest that individuals' luck-effort beliefs not only depend on past or current events that inform about the true state of the world but are also endogenous to the incentive structure individuals expect to face.
Principal’s Distributive Preferences and the Incentivization of Agents with Sophie Cêtre
Experimental Economics, 2023
Abstract: Do principals' distributive preferences affect the allocation of incentives within firms? We run a Principal-Agent lab experiment, framed as a firm setting. In the experiment, subjects are randomized in the principal or worker position. Principals must choose piece rate wage contracts for two workers that differ in terms of ability. Workers have to choose an effort level that is non-contractible. Principals are either paid in proportion to the output produced (Stakeholder treatment) or paid a fixed wage (Spectator treatment). We study how principals make trade-offs between incentive concerns (motivating workers to maximize output) and their own normative distributive preferences. We find that, despite the firm-frame and the moral hazard situation, principals do hold egalitarian concerns, as principals are on average willing to trade off their firm's performance (and so their own income) for more wage equality among their workers. The willingness to reduce inequality among workers is sensitive to both extensive and intensive margin incentives, which shows that principals' choices are shaped by incentives that they face themselves.
How Laws Affect the Perception of Norms: Empirical Evidence from the Lockdown with Roberto Galbiati, Emeric Henry, and Nicolas Jacquemet
PLOS One, 2021
Published Paper, Press: Vox-Column
Abstract: Laws not only affect behavior due to changes in material payoffs, but they may also change the perception individuals have of social norms, either by shifting them directly or by providing information on these norms. Using detailed daily survey data and exploiting the introduction of lockdown measures in the UK in the context of the COVID-19 health crisis, we provide causal evidence that the law drastically changed the perception of the norms regarding social distancing behaviors. We show that this effect of laws on perceived norms is mostly driven by an informational channel and that the intervention made perceptions of social norms converge to the actual prevalent norm.
Preferences over income distribution: Evidence from a choice experiment with Sophie Cêtre, Claudia Senik, and Thierry Verdier
Journal of Economic Psychology, 2019
Abstract: Using a choice experiment in the lab, we assess the relative importance of different attitudes to income inequality. We elicit subjects’ preferences regarding pairs of payoff distributions within small groups, in a firm-like setting. We find that distributions that satisfy the Pareto-dominance criterion attract unanimous suffrage: all subjects prefer larger inequality provided it makes everyone weakly better off. This is true no matter whether payoffs are based on merit or luck. Unanimity only breaks once subjects’ positions within the income distribution are fixed and known ex-ante. Even then, 75% of subjects prefer Pareto-dominant distributions, but 25% of subjects engage in money burning at the top in order to reduce inequality, even when it does not make anyone better off. A majority of subjects embrace a more equal distribution if their own income or overall efficiency is not at stake. When their own income is at stake and the sum of payoffs remains unaffected, 20% of subjects are willing to pay for a lower degree of inequality.