Abstract: Most people regard inequalities as more acceptable when they reflect differences in effort, rather than differences in luck. In practice however, effort and luck are often intertwined. We study redistributive behavior in a situation where it is common knowledge that luck completely determines whether an agent gets to work. In large-scale survey experiments in the United States and Sweden, we document how spectators tasked with redistributing between agents largely ignore that work status is exogenous, and grant working agents not only higher earnings, but also higher utility, than non-workers. One reason that this pattern arises is that initial, pre-redistribution, earnings act as a stronger reference point when agents work, even when their ability to work is randomly determined. The results are very similar in the two countries studied.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4244266
With Puja Bhattacharya
