Identity and Redistribution: Theory and Evidence

56 Pages Posted: 7 Jul 2020

See all articles by Sanjit Dhami

Sanjit Dhami

University of Leicester

Emma Manifold

University of Leicester - Department of Economics

Ali al-Nowaihi

University of Leicester - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2020

Abstract

We propose a theoretical model that embeds social identity concerns, as in Akerlof and Kranton (2000), with inequity averse preferences, as in Fehr and Schmidt (1999). We conduct an artefactual ultimatum game experiment with registered members of British political parties, for whom political identity is salient and redistribution is also likely to be salient. The empirical results are as follows. (1) Proposers and responders demonstrate ingroup-favoritism. (2) Proposers exhibit quantitatively stronger social identity effects relative to responders. (3) As redistributive taxes increase, average offers by proposers and the average minimum acceptable offers of responders (both as a proportion of income) decline by almost the same amount, suggesting a shared understanding that is characteristic of social norms. (4) Subjects experience less disadvantageous inequity from ingroup members relative to outgroup members.

Keywords: social identity, political identity, prosocial behavior, ultimatum game, fiscal redistribution, entitlements

JEL Classification: D010, D030

Suggested Citation

Dhami, Sanjit and Manifold, Emma and al-Nowaihi, Ali, Identity and Redistribution: Theory and Evidence (2020). CESifo Working Paper No. 8397, Available at SSRN: https://ssrn.com/abstract=3644811

Sanjit Dhami (Contact Author)

University of Leicester ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

HOME PAGE: http://www2.le.ac.uk/departments/economics/people/sdhami

Emma Manifold

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ali Al-Nowaihi

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

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