Essays on Fairness Preferences: An Experimental Approach

Abstract

Fairness is a central topic in ethics, political science and economics. A variety of economic questions, such as charitable donation, welfare programs, taxation of income and inheritances, are closely associated with people's fairness preferences. Hence it is important to take fairness and justice into account for making appropriate social welfare policy. This dissertation contributes to the related literature in understanding people's fairness preferences by using an experimental approach. It consists of three interrelated essays, all of which focus on fairness preferences and redistributive decision making under risk and uncertainty. The first essay is an experimental investigation into fairness preferences and redistribution under different rooted risks, i.e., pure-luck versus option-luck. Our experimental results reconcile the conflict between the accountability principle and consequential egalitarianism by suggesting that people are more inclined to the accountability principle in the presence of relatively lower income inequality but support consequential egalitarianism in case of large income inequality or salience of extreme low payoff. The second essay explores the dynamic evolution of a laboratory economy in which fairness preferences, risk preferences, and income inequality are jointly determined under different redistributive policies. By using a panel vector auto-regression model, we find different patterns of interplay between subjects under different redistributive regimes. The third essay studies how charitable giving is influenced by the performance of charitable organizations and associated organization costs. We study charitable giving in a laboratory experiment, in which donors are confronted with a tradeoff between helping people in need and the possibility of being cheated. We find evidence that individuals exploit the shadow of fundraising cost to excuse their selfishness with a self-serving biased belief that fundraisers are corrupt. In contrast, the charitable contribution significantly increases when the moral excuse is removed by excluding the manipulation of costs by the fundraisers.