The Effect of Initial Inequality on Meritocracy. A Voting Experiment on Tax Redistribution

Natalia Jiménez (), Elena Molis and Angel Solano Garcia ()

No 18/01, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: According to Alesina and Angeletos (2005), societies are less redistributive but more efficient when the median voter believes that effort and talent are much more important than luck to determine income. We test these results through a lab experiment in which participants vote over the tax rate and their pre-tax income is determined according to their performance in a real effort task with leisure time. Subjects receive either a high or a low wage and this condition is either obtained through their talent in a tournament or randomly assigned. We compare subjects' decisions in these two different scenarios considering different levels of wage inequality. In our framework, this initial income inequality turns out to be crucial to support the theoretical hypothesis of Alesina and Angeletos (2005). Overall, we find that, only if the wage inequality is high, subjects choose a lower level of income redistribution and they provide a higher effort level in the scenario in which high-wage subjects are selected based on their talent through a tournament (than when it is randomly). Thus, we confirm almost all theoretical results in Alesina and Angeletos (2005) when the wage inequality is high enough. The big exception is for efficiency (measured as the sum of total payoffs), since theoretical results only hold for the scenario in which wage inequality is low.

Keywords: income redistribution; voting; taxation; real-effort task; leisure. (search for similar items in EconPapers)
JEL-codes: C92 D72 H30 J41 (search for similar items in EconPapers)
Pages: 33 pages
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp, nep-ltv and nep-pol
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http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers18_01.pdf (application/pdf)

Related works:
Journal Article: The effect of initial inequality on meritocracy: A voting experiment on tax redistribution (2020)
Working Paper: The Effect of Initial Inequality on Meritocracy: a Voting Experiment on Tax Redistribution (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:18/01

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