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Free keywords:
Inequality, Fairness, Risk-taking
JEL:
C91 - Laboratory, Individual Behavior
JEL:
D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
JEL:
D9 - Micro-Based Behavioral Economics
Abstract:
Three determining factors for economic inequality are self-chosen effort, self-chosen risk, and external circumstances. The fairness people assign to inequalities due to effort and external circumstances is widely studied. Insights on the fairness of inequalities due to self-chosen effort and self-chosen risk, however, are lacking. I study a novel experimental setting where inequality is due to a choice over effort-provision and a choice over risk-taking. While the resulting inequality is mostly seen as fair, around 10% of third-party redistribution decisions are in line with a fairness norm that only considers the choice over effort.
