Essays on endogenous preferences and public generosity
This dissertation is a collection of four essays that question the behavioral assumptions of economics and aim to provide a richer model of redistributive politics than that based on traditional assumptions of exogenous, self-regarding, and outcome-oriented preferences. I argue that an enriched model of redistribution is necessary, and attempt to provide empirical evidence of endogenous, other-regarding, and non-outcome-oriented preferences that might explain puzzles which the traditional model cannot.
The assumption of self-interest is particularly ill-suited for the study of redistributive politics. Preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self-interest. People may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control. Alternatively, the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income, and self-interest is not properly controlled for. They may also measure incentive cost concerns. In Chapter 1, using survey data from the 1998 Gallup Poll Social Audit, I find that self-interest and incentive costs concerns cannot explain the effect of these beliefs on redistributive preferences.
I then report three studies designed to investigate the effects of economic experiences and institutions on preferences and behavior. In Chapter II I investigate how beliefs about the effects of effort, luck, and opportunity on income are updated. I model how people may update their beliefs based on comparisons of their actual earnings with expected income. I test the model using the National Longitudinal Surveys. In Chapter III I conduct an experimental test of the effect of minor differences in lottery procedures that which should have no effect according to expected utility theory on bidding behavior. In Chapter IV I investigate the effect of competition among players who bargain over the division of a sum of money on the inequality of the outcome. In these three chapters I find that beliefs about justice may be shaped by poor earnings relative to others, that procedural manipulations of the degree of involvement in income generating procedures may have significant effects on behavior, and that competition may undermine fair behavior.