Professed Inequality Aversion and Its Error Component

Abstract

In order to know better how people react when they are faced with a conflict between efficiency and equality in the distribution of disposable income, we asked 123 students to consider various ways of allocating fellowships to two hypothetical recipients. Each questionnaire consisted of a series of binary choice experiments, which led the respondents to disclose the amounts of equally distributed income they considered equivalent to two reference distributions of fellowships. The questionnaire was re-administered to a subsample of students after six months. We analyse the responses and the influence of the error term. It was found that envy is very common when the reference income situation is one of affluence whereas less extreme inequality aversion dominates strongly when the reference situation is close to the one experienced by most respondents: in the latter case, the variance as between individuals is also much smaller than in the former.

We wish to thank B. Jehin, Ph. Lambot and J.A. Morales for their helpful assistance. We retain responsibility for errors.