Second-Best Fairness: The Trade-off between False Positives and False Negatives

Alexander Cappelen, Cornelius Cappelen and Bertil Tungodden

American Economic Review, 2023, vol. 113, issue 9, 2458-85

Abstract: A main focus in economics is how to design optimal policies in second-best situations, which often requires a trade-off between giving some individuals more than they deserve, false positives, and others less than they deserve, false negatives. This paper provides novel evidence on people's second-best fairness preferences from large-scale experimental studies in the United States and Norway. The majority of people are more concerned with false negatives than with false positives, but we document substantial heterogeneity in second-best fairness preferences between the countries and across the political spectrum. The findings shed light on the political economy of social insurance and redistribution.

JEL-codes: D63 D72 D78 H23 I38 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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DOI: 10.1257/aer.20211015

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