Perceived Inequality and Preferences for Redistribution Among High Earners: Do Reference Groups Matter?

Mark Stabile, Bellet, Clément and Dylan Glover

No 16489, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Understanding attitudes towards inequality among the ``working rich" matters for any policy aimed at increasing the level of redistribution in society. We investigate this question using a unique sample of nearly 1,000 graduates from a highly ranked MBA program and a representative sample of Americans. We first show that high-earning MBAs are far more likely to know their rank in the income distribution. We then explore whether and how comparisons with peers or others (i.e. reference groups) shape their preferences for redistribution. Asking them to rank within their family, colleagues or classmates leads to an average 18\% drop in the income share allocated to the richest 1\% but has no discernible effect on their taxation preferences. We discuss the respective contribution of the comparative and normative functions of reference groups as potential mechanisms.

Date: 2021-08
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