Equal opportunities for all? How income redistribution promotes support for economic inclusion

Abstract

We experimentally investigate how income redistribution shapes support for economic inclusion, i.e., a policy that creates equality of opportunity for income generation. We study a setting in which lowendowment subjects are excluded from investment opportunities unless those with high endowments transfer resources to the low-endowment subjects. We find that support for economic inclusion is stronger among high-endowment subjects if incomes are known to be redistributed in the future compared to a situation in which this is precluded by design. Income redistribution spreads both risks and returns of investments in the population which, in turn, induces a higher rate of profitable investments, and this prospect tends to foster support for economic inclusion. Income redistribution thus induces more equal and efficient outcomes by boosting popular support for economic inclusion.

Evaluation of Common Prosperity Level and Regional Difference Analysis along the Yangtze River Economic Belt

“…In contrast, societies with unbalanced and non-reciprocal interactions lead to more inequality and a potentially stratified society [21]. Ilona Reindl and Jean-Robert Tyran experimentally studied popular support for economic inclusion, that is, policies of equal income-generating opportunities, and discuss how this support is influenced by the future income redistribution [22]. In addition, foreign scholars often use the concept of happiness to measure whether the development of a certain region or country is balanced, and the income gap of residents.…”

Procedural fairness and equality of opportunity

“…A final laboratory-experimental study that we want to discuss considers the effect of existing redistribution arrangements on support for equality of opportunity, an effect we have already discussed in the context of survey studies. Reindl and Tyran (2021) study a game where two players have to choose from several risky investment options, and their initial endowments affect their set of investment opportunities. Poor players are not able to choose the most efficient investment options, i.e., those with the highest expected return.…”

“…However, there are three different redistribution settings. Reindl and Tyran (2021) consider a treatment without redistribution, a treatment with redistribution, and a treatment in which redistribution is voted for or against after the investment options are selected and results are revealed. In the case of redistribution, assume that the rich believe that the poor will use any ex-ante transfers to take up the risky, high expected return investment.…”