Declining Wages Increase Selfish Redistribution in an Environment with Fixed Income Inequality

Henrik Zaunbrecher and Nickolas Gagnon
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Henrik Zaunbrecher: General Economics 0 (Onderwijs), RS: GSBE other - not theme-related research

No 23, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: We use a highly-controlled laboratory experiment to study the causal impact of income decreases on redistribution decisions, in an environment where the income inequality that may be created with wage changes is kept fixed. First, we investigate the role of a decreasing wage compared to one’s past wage (intra-personal decrease). Second, we investigate the role of a wage that decreases relative to the wage of another person (inter-personal decrease). If intra-personal or inter-personal decreases create dissatisfaction for an individual, that person may support redistribution policies that compensate him or her for the situation or rectify it. Overall, we find evidence that individuals indeed behave more selfishly when they experience decreasing wages. While many studies examine the effect of income inequality on redistribution decisions, this is the first to isolate the effect of income changes.

JEL-codes: C91 D31 D63 (search for similar items in EconPapers)
Date: 2020-08-27
New Economics Papers: this item is included in nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2020023

DOI: 10.26481/umagsb.2020023

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