Fairness in times of crisis: Negative shocks, relative income, and preferences for redistribution
with Anna Hochleitner
Luxembourg Institute of Socio-Economic Research (LISER)
Maison des Sciences Humaines
11, Porte des Sciences
L-4366 Esch-sur-Alzette / Belval
LISER Conference room 1st floor
10:00 am
11:15 am
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This paper investigates whether and how negative economic shocks affect redistributive preferences. Informed by a theoretical framework, I design an experiment that exogenously varies an individual's experience of negative income shocks before they decide how to redistribute resources. Furthermore, the experiment introduces exogenous differences in relative income, distinguishing between poorer individuals who benefit from redistribution and richer individuals who benefit from the status quo. The results provide causal evidence that redistributive decisions depend on relative income, with poorer individuals favouring higher levels of redistribution. Moreover, the effect of negative shocks is conditional on relative income. While poorer individuals do not respond to shocks, richer individuals become more opposed to redistribution when they are hit by a shock, but more supportive of redistribution if poorer individuals are affected. A follow-up study extends these findings by bringing real world income shocks caused by the recent Covid-19 crisis into the experiment.  

More about the 3E DTU

The Doctoral Training Unit (DTU) 3E - Experiments, Ethics and Economics - consists of an interdisciplinary consortium of 9 social scientists who use scientific experiments involving human subjects in their research. The objective of the consortium is to create a formal link for collaboration across the three existing social science research laboratories in Luxembourg, with the aim to push forward the state-of-the-art of what we know about human behavior in economic interactions. The DTU 3E gathers members across 5 Luxembourgish research units:

(1) Luxembourg Institute of Socio-Economic Research LISER
(2) Institute for Health and Behavior IHB (Faculty of Humanities FLSHASE, University of Luxembourg UL)
(3) Institute of Cognitive Science and Assessment COSA (FLSHASE, UL)
(4) Luxembourg School of Finance LSF (Faculty of Law, Economics and Finance FDEF, UL)
(5) Luxembourg Centre of Logistics LCL (Economics Research Centre CREA, FDEF, UL)

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