Preferences for Redistribution and Social Structure

Abstract

We model inter-individual differences in preferences for redistribution as a function of (a) self-interest; (b) stable ideological traits; (c) subjective perceptions of the relative importance of the main determinants of income differences (luck, effort, talent). Individuals base the latter on information obtained from their reference group. We analyse the consequences for redistributive preferences of homophilous reference group formation based on talent. We argue that our theoretical results make it possible to understand and integrate some of the main insights from the empirical literature. We illustrate with GSS data from 1987 how our model may help in structuring empirical work.

JEL Classification: D30, D63, D70