When Is Inequality Fair? An Experiment on the Effect of Procedural Justice and Agency

44 Pages Posted: 1 Aug 2014 Last revised: 9 Mar 2016

See all articles by Merve Akbaş

Merve Akbaş

Duke University - Department of Economics

Dan Ariely

Duke University - Fuqua School of Business

Sevgi Yuksel

UC Santa Barbara

Date Written: January 1, 2016

Abstract

We investigate how the perceived fairness of an income distribution depends on the beliefs about the process that generates the inequality. Specifically, we examine how two crucial features of this process affect fairness views: (1) Procedural justice – equal treatment of all; (2) Agency – one’s ability to determine his/her income. We do this in a lab experiment by differentially varying subjects’ ability to influence their earnings. Comparison of ex-post redistribution decisions of total earnings under different conditions indicate both agency and procedural justice to matter for fairness. Highlighting the importance of agency, we observe lower redistribution of unequal earnings resulting from risk when risk is chosen freely. Highlighting the importance of procedural justice, we find introduction of inequality of opportunity to significantly increase redistribution. Despite this increase, under inequality of opportunity, the share of subjects redistributing none remain close to the share of subjects redistributing fully revealing an underlying heterogeneity in the population about how fairness views should account for inequality of opportunity.

Keywords: fairness, justice, inequality, redistribution, agency, risk

JEL Classification: C91, D63

Suggested Citation

Akbas, Merve and Ariely, Dan and Yuksel, Sevgi, When Is Inequality Fair? An Experiment on the Effect of Procedural Justice and Agency (January 1, 2016). Available at SSRN: https://ssrn.com/abstract=2474368 or http://dx.doi.org/10.2139/ssrn.2474368

Merve Akbas (Contact Author)

Duke University - Department of Economics ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Dan Ariely

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 381-4366 (Phone)

Sevgi Yuksel

UC Santa Barbara ( email )

2127 North Hall
University of California
Santa Barbara, CA 93106
United States

HOME PAGE: http://www.econ.ucsb.edu/~sevgi/

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