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The anatomy of distributional preferences with group identity

Daniel Müller

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

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-groupÐoutgroup bias (search for similar items in EconPapers)
JEL-codes: D30 H30 H80 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2017-01, Revised 2017-03
New Economics Papers: this item is included in nep-exp, nep-neu and nep-upt
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