Other People’s Money: Preferences for Equality in Groups

33 Pages Posted: 4 Dec 2020

See all articles by Joy Buchanan

Joy Buchanan

Samford University

Gavin Roberts

Weber State University (WSU) - Department of Economics

Date Written: October 13, 2020

Abstract

Economic policy decisions often involve a tradeoff between equality and efficiency implemented through income redistribution. We test whether people are more likely to purchase equality with their own money versus transferring someone else’s money to a low-income group member which reduces inequality at the cost of group efficiency. We synthesize (Andreoni & Miller 2002) and (Engellman & Strobel 2004) by using an experiment that allows us to measure willingness-to-pay for equality both with own income and other people’s money. Subjects are more likely to purchase equality with others' money at the cost of group efficiency. The average individual prefers an outcome with more own income and more inequality relative to our experimental status quo. The average willingness-to-pay for equality is positive when using others' money. However, our subjects are sensitive to prices even when making purchases with others' money. When the cost in terms of group efficiency is very high, subjects usually do not choose to reduce inequality. We find the same outcome when subjects decide as a dictator or with majority-rule decisions.

Keywords: Equality, Efficiency, Laboratory experiment, Majority rule, Dictator Game

JEL Classification: C91, C92, D31, D63, D64

Suggested Citation

Buchanan, Joy and Roberts, Gavin, Other People’s Money: Preferences for Equality in Groups (October 13, 2020). Available at SSRN: https://ssrn.com/abstract=3717153 or http://dx.doi.org/10.2139/ssrn.3717153

Joy Buchanan

Samford University ( email )

800 Lakeshore Drive
Birmingham, AL 35229
United States

Gavin Roberts (Contact Author)

Weber State University (WSU) - Department of Economics ( email )

Ogden, UT 84408-3807
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
16
Abstract Views
162
PlumX Metrics