New research shows that people do not only react to inequality based on their income or wealth. The results provide useful hints on forecasting possible public support for future policies which are expected to narrow the income disparity.
Inequality Aversion: One or Two Sources?
These findings offer evidence against conventional economic theory that says that most people desire greater equality for other reasons and then are willing to use the state to redistribute only if it is necessary to promote efficiency. There are two ways of measuring inequality aversion:
- Rawlsian Inequality Aversion : People do not want to be worse off than other people.
- Beneficial inequality aversion : individuals dislike the fact that other people are poorer than them in society.
Attitudes over these are spread across the spectrum and we have a limited understanding of how economic preferences influence political support for redistribution policy. They tested nearly 9,000 Danish subjects between the ages of 20 and 64 for their willingness to reject inequality in a behavioral experiment and connected the study participants’ responses to their preferences for what type of income redistribution serves the public interest (politically enforced or private charity).
The Relationship Between Inequality Aversion and Support for Redistribution
Overall, the study’s results clearly indicate that people like more equal society and prefer redistribution policies. The researchers discovered that the more strongly people were averse — were hostile to — both advantageous and disadvantageous inequality in capital, leverage, and residual income, the stronger their support for redistributing our national politics as a whole.
The pattern is different when looking at private charitable giving though. The greater the regional opposition to advantageous inequality (the presence of poorer people), the more contributors donate; the greater the regional opposition to disadvantageous inequality (being worse off than others), the less contributors donate.
This reveals intricate relationship in people’s inequality aversion scores and preferences for certain forms of redistribution both at the societal and personal level. The results could help policymakers anticipate and explain public support for upcoming redistributive policies.
Conclusion
These results suggest that the standard economic view is incorrect and individuals do care about others’ income to some degree in supporting redistribution policy, according to the study. Rather, the study shows that people’s «general intolerance of inequity, » whether to their benefit or disadvantage, is key in shaping their support of anti-inequality policies. I have found interesting answers with straightforward implications to keep in mind for the near future as new challenges arise around income inequality and redistribution.
