Preference for Redistribution: Does Merit Matter When Winners are Lucky? [Link]
Abstract: Experimental studies show that individuals’ preference to redistribute depends on the initial source of inequality, with people being more tolerant of inequality when it is due to merit as compared to when it is caused by luck. In this paper, I show that merit affects redistributive preferences even when it is not the source of inequality. Specifically, I test settings where inequality in bonus arises due to luck, but individuals receive additional information about how meritorious the lucky winners are in comparison to the unlucky. In an online experiment, I use a novel modification of the worker-spectator design, where workers are participants who perform a real-effort task and spectators are third party observers who decide whether and how to redistribute a bonus of $4 between a worker-pair. I design four scenarios by manipulating the source of initial inequality in bonus and the information spectators have about the performance of workers in a pair. I causally show that when spectators are given information about workers’ merit, they redistribute significantly in favor of the meritorious worker irrespective of their luck. That is, merit acts as a normative benchmark for what people consider fair even when it is not the source of inequality. As a secondary contribution, I also examine workers’ belief and their effort in response to the spectator’s redistribution decision. I find that workers systematically underestimated the importance of merit in spectators’ decisions.
PEER-REVIEWED PUBLICATION
Abstract: We revisit two fundamental motivations of dishonesty: financial incentives and probability of detection. We use an ability-based real effort task in which participants who are college students in India can cheat by over reporting the number of puzzles they could solve in a given period of time. The puzzles are all unsolvable and this fact is unknown to participants. This design feature allows us to obtain the distribution of cheating outcomes at the individual level. Controlling for participant attributes, we find that introducing piece-rate financial incentives lowers both the likelihood and magnitude of cheating only for individuals with a positive probability of detection. On the other hand, a decrease in the probability of detection to zero increases magnitude of cheating only for individuals receiving piece-rate incentives. Moreover, we observe that participants cheat significantly even in the absence of piece-rate incentives indicating that affective benefits may determine cheating. Finally, an increase in own perceived wealth status vis-à-vis one’s peers is associated with a higher likelihood of cheating while feeling more satisfied with one’s current economic state is associated with a lower magnitude of cheating.
Unequal Opportunity, Mobility and Redistribution
Abstract: How does the presence of one type of redistributive policy affect the support for another? In this paper, I use an online experiment to examine how provision of mobility opportunity for the disadvantaged affect individuals' support for income redistribution. Specifically, I consider two types of criteria that is used for selecting recipients of mobility opportunity, i.e., merit and luck and test how the different selection criteria affects support for redistribution. I use a new modification of the worker-spectator design to answer my research question. In this experiment, I randomly assign positions of advantage and disadvantage to workers in a pair depending on the version of task (i.e., easy or difficult) they get paid for. Further, I introduce an upward mobility opportunity for only the disadvantaged type of worker. As an impartial observer, each spectator makes redistributive decisions for various scenarios that differ by whether the disadvantaged worker qualified by merit or luck to receive the upward mobility and how the disadvantaged worker performed after receiving the mobility opportunity relative to the ex-ante advantaged worker. I hypothesize that when the selection criteria for giving mobility opportunity is merit, then spectators would prefer to redistribute less as compared to when the selection criteria is based on luck. If my results support the hypothesis, it would suggest that in comparison to luck-based opportunities, merit-based opportunities tend to hurt the disadvantaged further.