Declining Wages Increase Selfish Redistribution in an Environment with Fixed Income Inequality

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Abstract

We use a highly-controlled laboratory experiment to study the causal impact of income decreases on redistribution decisions, in an environment where the income inequality that may be created with wage changes is kept fixed. First, we investigate the role of a decreasing wage compared to one’s past wage (intra-personal decrease). Second, we investigate the role of a wage that decreases relative to the wage of another person (inter-personal decrease). If intra-personal or inter-personal decreases create dissatisfaction for an individual, that person may support redistribution policies that compensate him or her for the situation or rectify it. Overall, we find evidence that individuals indeed behave more selfishly when they experience decreasing wages. While many studies examine the effect of income inequality on redistribution decisions, this is the first to isolate the effect of income changes.
Original languageEnglish
PublisherMaastricht University, Graduate School of Business and Economics
Number of pages41
DOIs
Publication statusPublished - 27 Aug 2020

Publication series

SeriesGSBE Research Memoranda
Number023
ISSN2666-8807

JEL classifications

  • c91 - Design of Experiments: Laboratory, Individual
  • d31 - Personal Income, Wealth, and Their Distributions
  • d63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

Keywords

  • income inequality
  • income change
  • social preferences
  • social comparison
  • income redistribution

Cite this

Zaunbrecher, H., & Gagnon, N. (2020). Declining Wages Increase Selfish Redistribution in an Environment with Fixed Income Inequality. Maastricht University, Graduate School of Business and Economics. GSBE Research Memoranda, No. 023 https://doi.org/10.26481/umagsb.2020023