Are We in the Same Boat or Not? The Opposite Effects of Absolute and Relative Income Shifts on Redistributive Preferences

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Authors Vittorio Mérola, Agnar Freyr Helgason
Journal/Conference Name THE JOURNAL OF POLITICS
Paper Category
Paper Abstract What are the effects of economic mobility and macroeconomic cycles on redistributive preferences? These questions have gained more prominence in recent years, yet our main theoretical frameworks often provide conflicting predictions and empirical evidence has been contradictory. We argue that this confusion is mostly due to the crucial distinction between absolute and relative income shifts, both of which are produced during economic cycles yet are rarely separated conceptually or empirically. After relative income shifts, differences are made salient, resulting in more self-interested behavior. Conversely, after absolute income shifts, similarities become more apparent, resulting in more group-driven behavior. We demonstrate this experimentally, using a novel “redistribution game.” The results indicate that expected shifts in absolute and relative income have mostly opposite effects on preferences, highlighting the importance of carefully conceptualizing and measuring the effects of income shifts. This h...
Date of publication 2016
Code Programming Language R
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