Academic journal article
By Esarey, Justin; Salmon, Timothy C.; Barrilleaux, Charles
Economic Inquiry , Vol. 50, No. 3
Why do people support income redistribution? While classical economic theory supposes that individuals possess purely self-interested preferences, countless demonstrations both in the lab and in the field suggest that individual preferences are driven by some other-regarding impulses. This phenomenon has been shown to be quite robust in the bargaining literature with dictator and ultimatum games (see Camerer 2003 for an in-depth survey) as well as other contexts such as public goods (Ledyard 1995) and contracting (Fehr and Falk 2002; Fehr and Gachter 2002). The preferences demonstrated in laboratory experiments for small stakes have also been shown to translate into larger stakes environments and environments outside of the laboratory. (1) For example, as shown by Kam, Cranmer, and Fowler (2007), actions in experimental dictator games have been linked to generosity in contributions to charitable groups.
While many of these demonstrations involve small-scale, interpersonal, and occasionally abstract situations, government income redistribution programs are a large-scale and important observable phenomenon that might well be related to these other-regarding preferences. If people in general possess preferences for a fair distribution of income, such preferences should lead to the income redistribution programs that we observe at virtually all levels of government. Thus one might take the existence of these programs as evidence for the macrolevel impact of other-regarding preferences. This claim is not entirely clear because redistributive programs may be produced by classical, self-interested preferences if politicians advocate them to gain electoral support from low-income voters who stand to benefit financially from their adoption. This explanation allows for the existence of income redistribution programs in a self-interested world that requires no other-regarding preferences. Thus it is unclear whether redistribution is driven by self-regarding or other-regarding preferences, and it is important to distinguish between those influences to understand the base of support for welfare and other similar programs.
Previous evidence indicates that a widely held preference for fair distribution explains apparently irrational public support for redistribution. For example, there is reason to believe that at least some support for these programs comes from individuals with high incomes who will not financially benefit from income redistribution, behavior that observers describe as a reflection of a public regardingness in their behavior (see, for example, Wilson and Banfield 1964). This, therefore, supports the claim that income redistribution programs are based on other-regarding preferences of the rich rather than or perhaps in addition to the self-interest of the poor.
Some experimental evidence also shows that subjects favor more equitable income distributions, implying a not purely self-interested motive to support redistribution schemes. Scott et al. (2001) and Michelbach et al. (2003) report experiments in which subjects are asked to choose between various hypothetical income distributions for a hypothetical country given multiple options. They find that people generally choose more equitable distributions. Frohlich, Oppenheimer, and Eavey (1987) investigate what sort of redistribution principles subjects will adopt when they are introduced to various possibilities, finding that subjects prefer to set a minimum income floor below which people cannot fall. While these studies suggest that people make political choices according to principles of fairness, the evidence provided is gathered in a setting that is (by design and intentionally) not directly analogous to how taxing and redistribution decisions are made. The Scott et al. (2001) and Micbelbach et al. (2003) experiments involved hypothetical choices about potential income distributions, and so making more equitable choices cost the subjects nothing. …