Tinbergen Institute Discussion Paper TI 2018-087/I
We propose an instrument to measure individuals' social preferences regarding equity and efficiency behind a veil of ignorance. We pair portfolio and wealth distribution choice problems which have a common budget set. For a given bundle, the distribution over an individual's wealth is the same for both problems. The portfolio choice serves as a benchmark to evaluate whether the wealth distribution choice exhibits equity or efficiency preferring tastes. We report experiments using a within-subject design testing the veracity of this instrument. We find clusters of equity preferring, efficiency preferring, and socially agnostic individuals through reduced form, revealed preference, and structural estimation analyses.
Inequity aversion revealed preference risk preferences social preferences veil of ignorance