Inequality of Opportunity, Biased Beliefs, and Demand for Redistribution

A description of this study will be in fields that will not become public until the experiment has completed.

2021-09-28

2021-12-31

See the pre-analysis plan for more information.

See the pre-analysis plan for more information.

See the pre-analysis plan for more information.

See the pre-analysis plan for more information.

A description of this study will be in fields that will not become public until the experiment has completed.

Research has consistently found that people in many parts of the world are willing to tolerate wealth inequality when it is the outcome of personal choices and effort. On the other hand, people tend to support redistribution if luck is the source of inequality. In practice, luck and effort are often intertwined: luck begets effort and vice versa. This research project aims to explore how people's acceptance of inequality is shaped by how luck presents itself: (1) as an opportunity to demonstrate merit or (2) as a windfall gain independent from merit. The goal is to understand in which environments people accurately grasp the importance of luck in shaping outcomes, and what interventions lead to more precise beliefs. To study these questions, a novel online experiment is proposed to manipulate the dynamics of effort and luck, and to measure how the affected perceptions about the importance of luck versus effort shape demand for redistribution.

To shed light on why demand for redistribution has remained stagnant despite luck being increasingly important, we study redistributive preferences in the presence of inequalities of opportunities using an online experiment. Our experiment has two types of players---workers and spectators---and is divided into three stages: a production stage, an earnings stage, and a redistribution stage. Workers actively participate in the first two stages. In the production stage, workers engage in a real-effort task for a fixed amount of time. In the “luck as windfall gains” treatments, a coin flip decides whether performance or chance determine the winner. In the unequal opportunity treatments, we exogenously vary the rate of return or “multiplier” of each completed task across workers at the beginning of the experiment, thereby generating inequality of opportunities. The output of each worker is given by her number of completed tasks times her exogenous return to effort. In the earnings stage, workers are randomly matched in pairs and the worker with the highest output earns $X while the worker with the lowest output earns $Y. In the final redistribution stage, spectators---subjects who do not engage in the real-effort task---make earnings allocation decisions between players. Specifically, spectators decide whether and how much income to redistribute between the high-earnings worker and the low-earnings worker. In our baseline treatment cases, the spectators know which player won and the multipliers of each player (or the probability of a coin flip, respectively), but not the output nor the number of tasks completed by each worker.

Further details of our experimental design are provided in the pre-analysis doc.

Randomization done by computer (oTree).

Individual

No

1200 individuals

1200 individuals

See pre-analysis plan for more information.