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Self-Centered Inequity Aversion and the Mass Politics of Taxation

Working Papers
inequalityaversiontaxpref dec14v2 page 01

The politics of economic crises bring distributive economic conflict to the fore of national political debates. How policy should be used to transfer resources between citizens becomes a central political question and the answers chosen often influence the trajectory of policy for a generation. This context provides an ideal setting for evaluating the importance of self-interest and other-regarding preferences in shaping public opinion about economic policy. This paper investigates whether self-centered inequity aversion along with self-interest influences individual tax policy opinions. We conduct original survey experiments in France and the United States and provide evidence that individuals care both about how policy alternatives affect their own interests and how they influence the welfare of others relative to themselves. Our estimates suggest that in France both disadvantageous inequality aversion---utility losses when others have better economic outcomes---and advantageous inequality aversion---utility losses when others have worse economic outcomes---are important determinants of tax policy preferences. In the United States, we find strong evidence of disadvantageous inequality aversion but not advantageous inequality aversion. The results for both countries suggest that self-interest and other-regarding preferences influence tax policy preferences and the findings in France are strongly consistent with self-centered inequity aversion.

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