Morten Nyborg Støstad, Paris School of Economics (Job Market Seminar)

"The Consequences of Inequality: Beliefs and Redistributive Preferences"

Abstract

What are the societal consequences of economic inequality, and how do concerns for these consequences affect individuals' redistributive preferences? This paper examines beliefs about how economic inequality changes society, and establishes a causal link between such inequality externality beliefs and redistributive preferences. Using two representative surveys of a combined 6,731 U.S. citizens, we show that a majority of respondents believe that inequality leads to negative societal outcomes through channels such as increased crime, deteriorating democratic institutions, and diminished economic growth. We establish a causal link from individuals' inequality externality beliefs to their redistributive preferences by using exogenously provided video information treatments. With this and other methods we estimate that inequality externality beliefs are about two-thirds as impactful for individuals' redistributive preferences as broad fairness views. Although Democrats are more likely to believe in the negative consequences of inequality than Republicans, beliefs are surprisingly similar across political parties and less polarized than comparable economic fairness views. Inequality externality-based arguments cause less anger among respondents than fairness-based arguments, however, indicating structural differences in the two types of arguments.

Contact person: Niels Johannesen