Heterogeneity, inequity aversion, and group performance

Felix Kölle, Dirk Sliwka and Nannan Zhou ()

Social Choice and Welfare, 2016, vol. 46, issue 2, 263-286

Abstract: We investigate the effects of inequality in wealth on the incentives to contribute to a group output when agents are inequity averse and may differ in ability. We show that equality may lead to a reduction of contributions below levels generated by purely selfish agents. But introducing inequality motivates more productive agents to exert higher efforts and help the group to coordinate on equilibria with less free-riding. As a result, less able agents may benefit from initially disadvantageous inequality. Moreover, the more inequity averse the agents, the more inequality should be imposed even by an egalitarian social planner. Copyright Springer-Verlag Berlin Heidelberg 2016

Keywords: D03; H41; D31; D63 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00355-015-0912-5

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