Dissecting Inequality-Averse Preferences

91 Pages Posted: 22 Jan 2021

See all articles by Marcelo Bergolo

Marcelo Bergolo

Universidad de la Republica - Instituto de Economía; IZA Institute of Labor Economics

Gabriel Burdin

University of Leeds - Leeds University Business School (LUBS); IZA Institute of Labor Economics

Santiago Burone

Universidad de la Republica

Mauricio de Rosa

affiliation not provided to SSRN

Matias Giaccobasso

University of California, Los Angeles (UCLA) - Anderson School of Management; Universidad de la Republica - Instituto de Economía

Martin Leites

Universidad de la República

Date Written: June 2020

Abstract

Although different approaches and methods have been used to measure inequality aversion, there remains no consensus about its drivers at the individual level. We conducted an experiment on a sample of more than 1,576 first-year undergraduate economics and business students in Uruguay to understand why people are inequality averse. We elicited inequality aversion by asking participants to make a sequence of choices between hypothetical societies characterized by varying levels of average income and income inequality. In addition, we use randomized information treatments to prime participants into competing narratives regarding the sources of inequality in society. The main findings are that (1) the prevalence of inequality aversion is high: most participants’ choices revealed inequality-averse preferences; (2) the extent of inequality aversion depends on the individual’s position in the income distribution; (3) individuals are more likely to accept inequality when it comes from effort rather than luck regardless of their income position; (4) the effect of social mobility on inequality aversion is conditional on individual’s income position: preferences for mobility reduces inequality aversion for individuals located at the bottom of the income distribution, where risk aversion cannot play any role.

Keywords: inequality aversion, fairness, risk, effort, luck, redistribution, questionnaire-experiments

JEL Classification: D63, D64, D81 C13, C91

Suggested Citation

Bergolo, Marcelo and Burdin, Gabriel and Burone, Santiago and de Rosa, Mauricio and Giaccobasso, Matias and Leites, Martin, Dissecting Inequality-Averse Preferences (June 2020). Available at SSRN: https://ssrn.com/abstract=3729710

Marcelo Bergolo (Contact Author)

Universidad de la Republica - Instituto de Economía ( email )

Montevideo
Uruguay

HOME PAGE: http://www.iecon.ccee.edu.uy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Gabriel Burdin

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Santiago Burone

Universidad de la Republica ( email )

Gonzalo Ramirez 1926
Montevideo, 11200
Uruguay

Mauricio De Rosa

affiliation not provided to SSRN

Matias Giaccobasso

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Universidad de la Republica - Instituto de Economía ( email )

Montevideo, Montevideo
Uruguay

Martin Leites

Universidad de la República ( email )

Avenida 18 de Julio 182
Montevideo, 11100
Uruguay

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