Redistribution of income from richer people to poorer people seems like something that poorer people should be more supportive of than are richer people. After all, they would benefit directly from such redistribution, and it would reduce inequality of income. However, as I've noted in posts before (see here and here), perhaps people don't prefer lower inequality, they prefer greater fairness. So, people's preferences for redistribution are somewhat more complicated than simply being based on their relative position in the income distribution.
A new article by Christopher Hoy (Australian National University) and Franziska Mager (Oxfam Great Britain), published in the American Economic Journal: Economic Policy (ungated earlier version here), provides some real food for thought on the topic of preferences for redistribution. They first note three assumptions that underlie the seminal theories of preferences for redistribution:
Firstly, most people are averse to large income differences in their country, and this is particularly the case for relatively poor people. Secondly, people who are more concerned about inequality tend to be more supportive of redistribution. Thirdly, poorer people should be more supportive of redistribution than richer people, as they benefit directly.
Hoy and Mager note that most people have a 'median bias' in their belief about their position in the income distribution. That is, poorer people tend to believe that they are richer than they really are, while richer people tend to believe that they are poorer than they really are. Hoy and Mager essentially tests what happens when you give people information about their actual position in the income distribution, on preferences for redistribution. As they explain:
Surveys across a range of high-income countries have shown that most people tend to think that they are positioned around the middle of the national income distribution regardless of whether they are rich or poor... This raises the question that if relatively poor people were made aware of their position in the national income distribution, would they be more concerned about inequality and supportive of redistribution?
We test how informing people that they are relatively poorer than they thought impacts their concern about inequality and support for redistribution through a randomized survey experiment with over 30,000 respondents in 10 countries (Australia, India, Mexico, Morocco, the Netherlands, Nigeria, South Africa, Spain, the United Kingdom, and the United States)... Respondents in each country were randomly allocated to receive either information about their position in the national income distribution (treatment group) or no information (control group). Prior to the treatment, respondents revealed their perception of the level of national inequality, their preferred level of national inequality, and their perceived place in the national income distribution... After the treatment, respondents were asked standard questions from the existing literature regarding their views about whether the gap between the rich and poor is too large in their country and whether they think the government is responsible for closing this gap...
Hoy and Mager note that:
Seminal theories of preferences for redistribution imply that informing people that they are relatively poorer than they thought would lead to greater concern about inequality and support for redistribution...
However, they find in their sample that:
...respondents in the poorest two quintiles of the national income distribution who were told they are relatively poorer than they thought are less concerned about the gap between the rich and poor in their country and are not any more supportive of the government closing this gap compared to respondents in the control group. This result occurs in seven countries (India, Mexico, Morocco, the Netherlands, Nigeria, South Africa, and Spain), and there was no effect caused by this information in the remaining three countries (Australia, the United Kingdom, and the United States).
In other words, this is the opposite of what the seminal theories would predict. Hoy and Mager then use a theoretical model to explain what might be causing these surprising results:
We illustrate that the likely channel causing the effect is people using their own standard of living as a “benchmark” for what they consider acceptable for others... People had perceived themselves to have an “average” living standard compared to other people in their country prior to the treatment even though they were actually relatively poor. Their previous assessment of their relative status implies that they thought there were similar shares of people poorer and richer than them in their country (this is as a result of placing oneself as being around the middle of the national income distribution). Upon receiving the treatment, this led people to realize two points. Firstly, there are fewer people in their country poorer than them than they had thought. Secondly, what they had considered to be an average living standard (i.e., their own standard of living) is actually relatively poor. In other words, relatively poor people consume more than they thought. Both of these points would suggest that the treatment provided to respondents would lead them to become less concerned about the living standard of poor people in their country.
Notice that this also accords with the idea that people prefer more fairness in the income distribution. Providing relatively poor people more accurate information about their position in the income distribution might make them believe that the distribution is fairer than they previously thought (after all, they are richer than they thought they were, relatively to others around them), and reduce their preferences for redistribution.
It is rare that a new study overturns some important seminal theory in such a convincing way as this study does. However, it would be easy to overstate what this study tells us about people's attitudes to inequality. In particular, it is important to note that these results are about preferences for redistribution, not aversion to inequality. As Hoy and Mager note:
...the results of our experiment illustrate that relatively poor people’s misperceptions of their position in the distribution do not appear to be lowering their concern about inequality. We provide evidence that the opposite is true. Relatively poor people would be even less concerned about inequality if they knew their true position in the national income distribution. In addition, we show that the elasticity of respondents’ preferences for redistribution to the treatment is substantially greater in middle-income countries than in high-income countries. This is a novel finding, as it suggests the literature on preferences for redistribution may well be qualitatively different if more research were to be conducted in these settings.
And that points to the importance of doing more research on this topic, in a wider range of countries. It also suggests that, if people in developed countries are given accurate information about where they are placed in the global income distribution, they may become more favourably disposed towards global redistribution. This assumes that the effect on relatively richer people works in exactly the opposite manner to the effect that Hoy and Mager find for poorer people (they don't show the effects on richer people in their study, but something similar was found in this study). That would suggest a way for advocacy groups to increase the support in developed countries for foreign aid, or perhaps to increase donations from 'ordinary people' in developed countries targeted at poverty reduction in developing countries. Changing preferences for global redistribution could have substantial global-welfare-improving implications.
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