Abstract

Joint with Puja Bhattacharya

Inequalities are often regarded as more acceptable when they reflect differences in effort, rather than in luck. Effort and luck are, however, often intertwined - elements of luck may decide if an individual can even exert effort. We study redistributive behavior when luck fully determines whether an agent works. Using survey experiments in general population samples in the United States and Sweden, we document how spectators, tasked with redistributing income between agents, grant working agents not only more earnings, but more implied utility, than non-workers. One reason is that pre-redistribution earnings are treated as a stronger reference point when agents work, even when the ability to do so is randomly determined.