In this paper I study 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 allowing them 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.
LocationAula ICS Siemens - Gamesa
SpeakerAnna Hochleitner (University of Nottingham)
Fairness in times of crisis: Negative shocks, relative income, and preferences for redistribution