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Equal Opportunities for All? How Income Redistribution Promotes Support for Economic Inclusion

Ilona Reindl and Jean-Robert Tyran
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Ilona Reindl: University of Vienna

No 20-07, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We experimentally investigate how income redistribution shapes support for economic inclusion, i.e., a policy that creates equality of opportunity for income generation. We study a setting in which low-endowment subjects are excluded from investment opportunities unless those with high endowments transfer resources to the low-endowment subjects. We find that support for economic inclusion is stronger among high-endowment subjects if incomes are known to be redistributed in the future compared to a situation in which this is precluded by design. Income redistribution spreads both risks and returns of investments in the population which, in turn, induces a higher rate of profitable investments, and this prospect tends to foster support for economic inclusion. Income redistribution thus induces more equal and efficient outcomes by boosting popular support for economic inclusion.

Keywords: laboratory experiment; income redistribution; economic inclusion; equality of opportunity; investment; risk taking (search for similar items in EconPapers)
JEL-codes: C91 D31 D63 D81 (search for similar items in EconPapers)
Date: 2020-10-26
New Economics Papers: this item is included in nep-exp and nep-fle
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