A Matter of Perspective: How Experience Shapes Preferences for Redistribution

Abstract

We investigate in a laboratory experiment if the experience of economic failure or success shapes people’s preferences for redistribution beyond self-interest. Subjects generated a high or a low income either through a lottery or through an effort-based tournament. A sub-set of subjects could then redistribute the income of another sub-set of subjects. We find that individuals who lost the tournament (lottery) redistribute significantly more than all the other types of distributors when the inequality is generated by the tournament (lottery). The effect still holds when controlling for self-selection into different outcomes of the tournament and can be explained by in- or out-group bias and a self-serving bias in responsibility attribution. These findings have implications for public policies and for the design of compensation schemes in organizations.

Keywords: Distributive Justice, Experience, Failure, In-Group Bias, Self-Serving Bias

JEL Classification: D310, D630, H230, M520