Redistributive Choices and Income Inequality: Experimental Evidence for Income as a Signal of Deservingness

Abstract

In this paper, we contribute to the debate on the determinants of redistribution policies and provide evidence that the source of income – whether income is earned through work as opposed to determined by luck – does not only affect the level of redistribution, but also the relationship between inequality and preferences for redistribution. We use a lab experiment with a two-by-two design, varying both how income is attributed (luck versus performance) and the degree of income inequality. We find that an increase in inequality has less impact on redistribution choices when income is earned through performance than when income results from luck. This implies that when income is earned through performance, individuals can use income differences and not only the income level as a heuristic to infer relative deservingness. Intuitively, if people believe income inequality increases as a result of performance rather than luck, then they are likely to believe the poor deserve to stay poor and the rich deserve to stay rich.