Identity and Redistribution: Theory and Evidence.

Abstract

We propose a theoretical model that combines social identity concerns (Akerlof and Kranton, 2000) with inequity averse preferences (Fehr and Schmidt, 1999). Our subjects are registered members of British political parties for whom identity and redistribution are salient. (1) Proposers and responders demonstrate ingroup-favoritism. (2) Proposers exhibit quantitatively stronger social identity effects. (3) In the presence of redistribution, offers by proposers and stated minimum acceptable offers by responders suggest a shared understanding characteristic of social norms. (4) Subjects experience more disadvantageous inequity from outgroup members relative to ingroup members.

Keywords: Social identity, Prosocial behavior, Ultimatum game, Fiscal redistribution, Entitlements

JEL Classification: D01, D03