Working Paper: CEPR ID: DP6406
Authors: Esteban F. Klor; Moses Shayo
Abstract: We design an experiment to study the effects of social identity on preferences over redistribution. The experiment highlights the trade-off between social identity concerns and maximization of monetary payoffs. Subjects belonging to two distinct natural groups are randomly assigned gross incomes and vote over alternative redistributive tax regimes, where the regime is chosen by majority rule. We find that a significant subset of the subjects systematically deviate from monetary payoff maximization towards the tax rate that benefits their group when the monetary cost of doing so is not significantly high. These deviations cannot be explained by efficiency concerns, inequality aversion, reciprocity, social learning or conformity. Finally, we show that behaviour in the lab helps explain the relationship between reported income and stated preferences over redistribution observed in surveys.
Keywords: Experimental Economics; Income Redistribution; Social Identity; Social Preferences
JEL Codes: C92; D63; D72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Social identity (Z13) | Voting behavior (D72) |
| Group identification (D70) | Support for group tax rate (H29) |
| Economic self-interest (F52) | Voting behavior (D72) |
| Cost of deviation (O22) | Support for ingroup tax rate (H29) |
| Group wealth status (D31) | Support for redistribution (D39) |