Social Preferences: Fundamental Characteristics and Economic Consequences

Abstract

We review the vast literature on social preferences by assessing what is known about their fundamental properties, their distribution in the broader population, and their consequences for important economic and political behaviors. We provide, in particular, an overview of the empirical characteristics of distributional preferences and how they are affected by merit, luck, and concerns for equality of opportunity. In addition, we identify what is known about belief-dependent social preferences such as reciprocity and guilt aversion. Furthermore, we discuss and assess the empirical relevance of self image and social image concerns in prosocial behaviors. The overall evidence indicates that a large majority of individuals have some sort of social preference, while purely self-interested subjects are a minority. We also document the converging insights from lab and field evidence on the role of social preferences for a deeper understanding of important phenomena such as the consequences of wage inequality on work morale, employees' resistance to wage cuts, individuals' self-selection into occupations that are more or less prone to morally problematic behaviors, as well as issues of distributive politics. However, although much has been learned in recent decades, there are still many important, unresolved, yet exciting, questions waiting to be tackled.

Keywords: preference heterogeneity, social preferences, altruism, inequality aversion, demand for redistribution

JEL Classification: D0, D2, D9, H0, J0, P0