Hostname: page-component-8448b6f56d-m8qmq Total loading time: 0 Render date: 2024-04-23T10:09:14.126Z Has data issue: false hasContentIssue false
  • English
  • Français

Preferences for redistribution and pensions. What can we learn from experiments?

Published online by Cambridge University Press:  11 February 2013

FRANZISKA TAUSCH ,
JAN POTTERS  and
ARNO RIEDL
FRANZISKA TAUSCH
Affiliation:
Department of Economics, Maastricht University, and Netspar (e-mail: f.tausch@maastrichtuniversity.nl)
JAN POTTERS
Affiliation:
Department of Economics, CentER, Tiber, Tilburg University, and Netspar
ARNO RIEDL
Affiliation:
Department of Economics, Maastricht University, IZA, CESifo, and Netspar
Get access Rights & Permissions [Opens in a new window]

Abstract

Redistribution is an inevitable feature of collective pension schemes and economic experiments have revealed that most people have a preference for redistribution that is not merely inspired by self-interest. However, little is known on how these preferences interact with preferences for different pension schemes. In this paper, we review the experimental evidence on preferences for redistribution and suggest some links to redistribution through pensions. For that purpose we distinguish between three types of situations. The first deals with distributional preferences behind a veil of ignorance. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. In the closing sections of the paper, we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?

Keywords

Experimental economicsredistribution preferencespension systemssolidarity
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 12 , Issue 3 , July 2013 , pp. 298 - 325
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bardsley, N. (2008) Dictator game giving: altruism or artifact? Experimental Economics, 11: 122–133.Google Scholar
Barr, A. and Genicot, G. (2008) Risk sharing, commitment and information: an experimental analysis. Journal of the European Economic Association, 6(6): 1151–1185.CrossRefGoogle Scholar
Bellemare, C., Kröger, S. and van Soest, A. (2008) Measuring inequity aversion in a heterogeneous population using experimental decisions and subjective probabilities. Econometrica, 76(4): 815–839.CrossRefGoogle Scholar
Bolton, G. E. and Katok, E. (1995) An experimental test for gender differences in beneficent behavior. Economics Letters, 48: 287–292.Google Scholar
Bolton, G. E. and Ockenfels, A. (2000) ERC: a theory of equity, reciprocity, and competition. American Economic Review, 90: 166–193.Google Scholar
Cabrales, A., Nagel, R. and Rodriguez Mora, J. V. (2006) It is Hobbes, not Rousseau: an experiment on social insurance. UC3M Working Paper 07–08.Google Scholar
Camerer, C. (2003) Behavioral Game Theory. Princeton: Princeton University Press.Google Scholar
Cappelen, A., Hole, A. D., Sørensen, E. Ø. and Tungodden, B. (2007) The pluralism of fairness ideals: an experimental approach. American Economic Review, 97: 818–827.CrossRefGoogle Scholar
Cappelen, A. W., Konow, J., Sørensen, E. Ø. and Tungodden, B. (2012) Just luck: an experimental study of risk taking and fairness. Forthcoming in American Economic Review.Google Scholar
Carpenter, J., Verhoogen, E. and Burks, S. (2005) The effect of stakes in distribution experiments. Economics Letters, 86: 393–398.Google Scholar
Centraal Planbureau (2000) Solidariteit, keuzevrijheid, en transparantie. De toekomst van de Nederlandse markt voor oudedagsvoorzieningen (Solidarity, freedom of choice, and transparency. The future of the market for old-age security in the Netherlands), Den Haag, SDU Uitgevers.Google Scholar
Charness, G. and Genicot, G. (2009) Informal risk sharing in an infinite-horizon experiment. Economic Journal, 119: 796–825.Google Scholar
Charness, G. and Gneezy, U. (2008) What's in a name? Anonymity and social distance in dictator and ultimatum games. Journal of Economic Behavior and Organization, 68(1): 29–35.CrossRefGoogle Scholar
Chaudhuri, A., Gangadharan, L. and Maitra, P. (2010) An experimental analysis of group size, endowment uncertainty and risk sharing. Working Paper. Available online at http://users.monash.edu.au/∼maitra/Risksharing_march26_2010.pdf.Google Scholar
Chavanne, D., McCabe, K. and Pia Paganelli, M. (2009) Redistributive Justice – Entitlements and Inequality in a Third-Party Dictator Game. George Mason University Working Paper.Google Scholar
Croson, R. and Gneezy, U. (2009) Gender differences in preferences. Journal of Economic Literature, 47(2): 448–474.Google Scholar
Cox, J. C. and Deck, C. A. (2006) When are women more generous than men? Economic Inquiry, 44(4): 587–598.Google Scholar
D'Excelle, B. and Riedl, A. (2010) Directed Generosity and Network Formation: Network Dimension Matters, IZA Discussion Paper No. 5356, December 2010.Google Scholar
Dickinson, D. L. and Tiefenthaler, J. (2002) What is fair? Experimental evidence. Southern Economic Journal, 69(2): 414–428.Google Scholar
Durante, R. and Putterman, L. (2009) Preferences for Redistribution and Perception of Fairness: An Experimental Study. Mimeo. Brown University.Google Scholar
Eckel, C. and Grossman, P. (1998) Are women less selfish than men? Evidence from dictator experiments. Economics Journal, 108: 726–735.Google Scholar
Esarey, J., Salmon, T. and Barrilleaux, C. (2009) Social Insurance and Income Redistribution in a Laboratory Experiment. Available online at http://ssrn.com/abstract=1361134.Google Scholar
Faravelli, M. (2007) How context matters: a survey based experiment on distributive justice. Journal of Public Economics, 91(7–8): 1399–1422.Google Scholar
Fehr, E. and Falk, A. (1999) Wage rigidity in a competitive incomplete contract market. Journal of Political Economy, 107: 106–134.Google Scholar
Fehr, E. and Schmidt, K. (1999) A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114: 817–868.Google Scholar
Forsythe, R., Horowitz, J., Savin, N. E. and Sefton, M. (1994) Fairness in simple bargaining experiments. Games and Economic Behavior, 6(3): 347–369.Google Scholar
Frechette, G. (2011) Laboratory Experiments: Professionals versus Students. Available online at http://ssrn.com/abstract=1939219.CrossRefGoogle Scholar
Frohlich, N. and Oppenheimer, J. A. (1990) Choosing justice in experimental democracies with production. American Political Science Review, 84(2): 461–477.CrossRefGoogle Scholar
Frohlich, N., Oppenheimer, J. A. and Eavey, C. L. (1987) Choices of principles of distributive justice in experimental groups. American Journal of Political Science, 31(3): 606–637.Google Scholar
Gächter, S. and Riedl, A. (2005) Moral property rights in bargaining with infeasible claims. Management Science, 51(2): 249–263.Google Scholar
Gächter, S. and Riedl, A. (2006) Dividing justly in bargaining problems. Social Choice and Welfare, 27: 571–594.CrossRefGoogle Scholar
Goeree, J., McConnell, M. A., Mitchell, T., Tromp, T. and Yarif, L. (2010) The 1/d law of giving. American Economic Journal: Micro-Economics, 2(1): 183–203.Google Scholar
Güth, W., Offerman, T., Potters, J., Strobel, M. and Verbon, H. (2002) Are family transfers crowded out by public transfers? Scandinavian Journal of Economics, 104(4): 587–604.Google Scholar
Hammond, P. (1975) Charity: altruism or cooperative egoism. In Phelps, E. (ed.), Altruism, Morality and Economic Theory. New York: Sage, pp. 115–131.Google Scholar
Harsanyi, J. (1955) Cardinal welfare, individualistic ethics, and interpersonal comparison of well-being. Journal of Political Economy, 63: 309–321.CrossRefGoogle Scholar
Herne, K. and Suojanen, M. (2004) The role of information in choices over income distributions. Journal of Conflict Resolution, 48(2): 173–193.Google Scholar
Höchtl, W., Sausgruber, R. and Tyran, J.-R. (2011) Inequality Aversion and Voting on Redistribution. Discussion Paper No. 11–18, Department of Economics, University of Copenhagen.Google Scholar
Hoffman, E., McCabe, K. A., Shachat, K. and Vernon, L. S. (1994) Preferences, property rights, and anonymity in bargaining games. Games and Economic Behavior, 7(3): 346–380.CrossRefGoogle Scholar
Hoffman, E., McCabe, K. and Smith, V. L. (1996) Social distance and other-regarding behavior in dictator games. American Economic Review, 86(3): 653–660.Google Scholar
Jakiela, P. (2009) How fair shares compare: experimental evidence from two cultures. Working Paper.Google Scholar
Johannesson, M. and Persson, B. (2000) Non-reciprocal altruism in dictator games. Economics Letters, 69: 137–142.Google Scholar
Klor, E. and Shayo, M. (2010) Social identity and preferences over redistribution. Journal of Public Economics, 94: 269–278.CrossRefGoogle Scholar
Konow, J. (1996) A positive theory of economic fairness. Journal of Economic Behavior and Organization, 31: 13–35.Google Scholar
Konow, J. (2000) Fair shares: accountability and cognitive dissonance in allocation decisions. American Economic Review, 90(4): 1072–1091.CrossRefGoogle Scholar
Konow, J., Saijo, T. and Akai, K. (2009) Morals and Mores: Experimental Evidence on Equity and Equality. Mimeo.Google Scholar
Kotlikoff, L. J., Persson, T. and Svensson, L. E. (1988) Social contracts as assets: a possible solution to the time-inconsistency problem. American Economic Review, 78: 662–677.Google Scholar
Krawczyk, M. and Le Lec, F. (2008) Social Decisions under Risk. Evidence from the Probabilistic Dictator Game. Mimeo.Google Scholar
Leider, S., Mobius, M., Rosenblat, T. and Do, Q.-A. (2009) Directed altruism and enforced reciprocity in social networks. Quarterly Journal of Economics, 124(4): 1815–1851.Google Scholar
List, J. A. (2007) On the interpretation of giving in dictator games. Journal of Political Economy, 115(3): 482–493.Google Scholar
List, J. A. and Cherry, T. L. (2008) Examining the role of fairness in high stakes allocation decisions. Journal of Economic Behavior and Organization, 65(1): 1–8.Google Scholar
Loewenstein, G. F., Thompson, L. and Bazerman, M. H. (1989) Social utility and decision making in interpersonal contexts. Journal of Personality and Social Psychology, 57: 426–441.Google Scholar
Messer, K. D., Poe, G. L., Rondeau, D., Schulze, W. D. and Vossler, C. A. (2010) Social preferences and voting: an exploration using a novel preference revealing mechanism. Journal of Public Economics, 94: 308–317.Google Scholar
Normann, H.-T. and Ricciuti, R. (2009) Laboratory experiments for economic policy making. Journal of Economic Surveys, 23: 407–463.Google Scholar
Offerman, T., Potters, J. and Verbon, H. (2001) Cooperation in an overlapping generations experiment. Games and Economic Behavior, 36: 264–275.Google Scholar
Oxoby, R. and Spraggon, J. (2008) Mine and yours: property rights in dictator games. Journal of Economic Behavior and Organization, 65: 703–713.Google Scholar
Paetzel, F., Sausgruber, R. and Traub, S. (2012) Social Preferences and Voting on Reform – An Experimental Study. Available online at http://ssrn.com/abstract=2066455.Google Scholar
Rawls, J. (1971) A Theory of Justice. Oxford: Oxford University Press.Google Scholar
Riedl, A. and van Winden, F. A. A. M. (2007) An experimental investigation of wage taxation and unemployment in closed and open economies. European Economic Review, 51(4): 871–900.Google Scholar
Riedl, A. and van Winden, F. A. A. M. (2012) Input versus output taxation in an experimental international economy. European Economic Review, 56(2): 216–232.Google Scholar
Ruffle, B. J. (1998) More is better, but fair is fair: tipping in dictator and ultimatum games. Games and Economic Behavior, 23: 247–265.Google Scholar
Schokkaert, E. and Capeau, B. (1991) Interindividual differences in opinions about distributive justice. Kyklos, 44: 325–345.Google Scholar
Schokkaert, E. and Overlaet, B. (1989) Moral intuitions and economic models of distributive justice. Social Choice and Welfare, 6(1): 19–31.Google Scholar
Sefton, M. (1992) Incentives in simple bargaining games. Journal of Economic Psychology, 13: 263–276.Google Scholar
Selten, R. and Ockenfels, A. (1998) An experimental solidarity game. Journal of Economic Behavior and Organization, 34: 517–539.CrossRefGoogle Scholar
Shayo, M. and Harel, A. (2012) Non-consequentialist voting. Journal of Economic Behavior and Organization, 81: 299–313.Google Scholar
Tyran, J.-R. and Sausgruber, R. (2006) A little fairness may induce a lot of redistribution in democracy. European Economic Review, 50(2): 469–85.Google Scholar
Yaari, M. E. and Bar-Hillel, M. (1984) On dividing justly. Social Choice and Welfare, 1: 1–24.Google Scholar
van der Heijden, E., Nelissen, J., Potters, J. and Verbon, H. (1997) Intergenerational transfers and private savings: an experimental study. Kyklos, 50(2): 207–220.Google Scholar
van der Heijden, E., Nelissen, J., Potters, J. and Verbon, H. (1998) Transfers and the effect of monitoring in an overlapping-generations experiment. European Economic Review, 42: 1363–1391.Google Scholar
van der Lecq, S. and Steenbeek, O. (2007) Introduction. In van der Lecq, S. and Steenbeek, O. (eds), Costs and Benefits of Collective Pension Systems. Berlin: Springer-Verlag.Google Scholar