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The anatomy of distributional preferences with group identity

Daniel Müller

Journal of Economic Behavior & Organization, 2019, vol. 166, issue C, 785-807

Abstract: The increasing diversity of societies raises questions about the consequences for redistributive preferences. This paper assesses the impact of social identity on distributional preferences in a modified dictator game. I estimate individual-level utility functions with two parameters that govern the trade-offs between equity and efficiency and giving to self and to other. Subjects on average put less weight on income of the out-group. The out-group treatment also changes the distribution of equity-efficiency concerns. However, the experiment also uncovers a large individual heterogeneity of preferences. An analysis of GARP violations reveals that choices in both treatments overwhelmingly stem from well-behaved, yet systematically different underlying utility functions. Hence, the evidence presented here suggests that the rational choice approach is a useful tool for understanding the effect of social identity on preferences.

Keywords: Social identity; Inequality; Distributional preferences; GARP; Rationality; In-group–outgroup bias (search for similar items in EconPapers)
JEL-codes: D30 H30 H80 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jebo.2019.09.009

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