Bertil Tungodden

Fairness and the Development of Inequality Acceptance

Fairness or Equality? Inequality in payments may be seen as inherently unfair, or as appropriate when it reflects differential achievement. Using an economic exchange game, Almås et al. (p. 1176) mapped how judgments changed from 5th-grade students to 13th graders: Fifth graders expressed a preference for equal division of rewards, whereas the 13th graders tolerated unequal outcomes, as long as they had been provided with evidence of unequal inputs. That is, the younger children were strict egalitarians, but the older ones—perhaps as a consequence of exposure to a variety of achievement-based social activities, such as sports—tended toward meritocracy. As children progress to adolescence, their sense of fairness changes from pure equality to proportionality based on merit. Fairness considerations fundamentally affect human behavior, but our understanding of the nature and development of people’s fairness preferences is limited. The dictator game has been the standard experimental design for studying fairness preferences, but it only captures a situation where there is broad agreement that fairness requires equality. In real life, people often disagree on what is fair because they disagree on whether individual achievements, luck, and efficiency considerations of what maximizes total benefits can justify inequalities. We modified the dictator game to capture these features and studied how inequality acceptance develops in adolescence. We found that as children enter adolescence, they increasingly view inequalities reflecting differences in individual achievements, but not luck, as fair, whereas efficiency considerations mainly play a role in late adolescence.

Human and Financial Capital for Microenterprise Development: Evidence from a Field and Lab Experiment

Microenterprises constitute an important source of employment, and developing such enterprises is a key policy concern in most countries. But what is the most efficient tool for microenterprise development? We study this question in a developing country context Tanzania, where microenterprises are the source of employment for more than half of the labor force, and we report from a field experiment that jointly investigated the importance of a human capital intervention business training and a financial capital intervention business grant. Using data from three survey rounds, a lab experiment, and administrative records of the microfinance institution, we present evidence on business performance, management practices, happiness, business knowledge, and noncognitive abilities. Our study demonstrates strong effects of the combination of the two interventions on male entrepreneurs, while the effects on female entrepreneurs are much more muted. The results suggest that long-term finance is an important constraint for microfinance entrepreneurs, but that business training is essential to transform financial capital into productive investments. Our study also points to the need for more comprehensive measures to promote the businesses of female entrepreneurs. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1933 . This paper was accepted by John List, behavioral economics.

Willingness to Compete: Family Matters

This paper studies the role of family background in explaining differences in the willingness to compete. By combining data from a lab experiment conducted with a representative sample of adolescents in Norway and high quality register data on family background, we show that family background is fundamental in two important ways. First, boys from low socioeconomic status families are less willing to compete than boys from better off families, even when controlling for confidence, performance, risk preferences, time preferences, social preferences, and psychological traits. Second, family background is crucial for understanding the large gender difference in the willingness to compete. Girls are much less willing to compete than boys among children from better off families, whereas we do not find any gender difference in willingness to compete among children from low socioeconomic status families. Our data suggest that the main mechanism explaining the role of family background is that the father’s socioeconomic status has a large effect on the boys’ willingness to compete, but no effect on the girls. We do not find any effect on the willingness to compete for boys or girls of the mother’s socioeconomic status or other family characteristic that may potentially shape competition preferences, including parental equality and sibling rivalry.

Resolving Distributional Conflicts Between Generations

We describe a new approach to the problem of resolving distributional conflicts between an infinite and countable number of generations. We impose conditions on the social preferences that capture the following idea: If preference (or indifference) holds between truncated paths for infinitely many truncating times, then preference (or indifference) holds also between the untruncated infinite paths. In this framework we use such conditions to (1) characterize different versions of leximin and utilitarianism by means of equity conditions well-known from the finite setting, and (2) illustrate the problem of combining Strong Pareto and impartiality in an intergenerational setting.

Fiscal corruption: A vice or a virtue?

Recent literature on tax administration in poor countries suggests that inducing more fiscal corruption may contribute to reducing tax evasion and increasing tax revenues. But does such an intriguing paradox justify policies that stimulate corruption? Our answer is no, and this note puts forward three arguments to support our view. First, while corruption may raise revenues in the short run, in general the opposite will be the case in the longer run. Second, the instrumental value of reducing corruption goes far beyond its effects on tax evasion and tax revenues. Accepting corruption as a policy strategy to increase tax revenues may undermine values of democracy and good governance. Third, eliminating corruption should be considered an end in itself. Thus, contrary to recent suggestions on incentive reforms in tax administration, the reasonable starting point for policy debates in this area should still be that an increase in fiscal corruption is not an appropriate instrument to raising tax revenues. Sustained development cannot grow from an institutional framework that fosters corruption and extra-legal tax enforcement.

THE VALUE OF EQUALITY

Over the years, egalitarian philosophers have made some challenging claims about the nature of egalitarianism. They have argued that the Rawlsian leximin principle is not an egalitarian idea; that egalitarian reasoning should make us reject the Pareto principle; that the numbers should not count within an egalitarian framework; that egalitarianism should make us reject the property of transitivity, that the Pigou-Dalton principle needs modication, and that the intersection approach faces deep problems. In this paper, taking the recent philosophical debate on equality versus priority as the starting point, I review these claims from the point of view of an economist.

Social Preferences in the Lab: A Comparison of Students and a Representative Population†

We report from a lab experiment conducted with a sample of participants that is nationally representative for the adult population in Norway and two student samples (economics students and non-economics students). The participants make choices both in a dictator game (a non-strategic environment) and in a generalized trust game (a strategic environment). We find that the representative sample differs fundamentally from the student samples, both in the relative importance assigned to different moral motives (efficiency, equity, and reciprocity) and in the level of selfish behavior. It is also interesting to note that the gender effects observed in the student samples do not correspond to the gender effects observed in representative sample. Finally, whereas economics students behave less pro-socially than non-economics students, the two student groups are similar in the relative importance they assign to different moral motives.

Non-welfaristic theories of justice: Is ''the intersection approach'' a solution to the indexing impasse?

Abstract.Rawls (1971, 1993) suggests that a primary goods index should be the basis for interpersonal comparisons in a theory of justice, but it is well known that in general this approach is not compatible with the Pareto principle. This is the indexing impasse. Sen (1985, 1991) argues that this is partly due to the fact that the approach does not take note of the citizen’s orderings of these bundles of valuable objects. He suggests an “intersection approach”, which is an incomplete approach to interpersonal comparisons based on judgements that are shared implications of the relevant set of weighting schemes. In this paper, we show that “the intersection approach” does not provide any solution to the indexing impasse. Unless the individuals have identical preferences, “the intersection approach” is incompatible with the Pareto principle.

Tax policy and fair inequality

The standard economic approach to tax policy has to a large extent relied on welfarist theories of justice, in particular the utilitarian view that the government should try to maximize the sum of individual welfare. This welfarist framework has proved a productive point of departure for much economic analysis, but it has an important limitation in its inability to take into account considerations of personal responsibility. Welfarist theories evaluate policies solely on the basis of their consequences for individual welfare, and thus do not assign any intrinsic importance to how a specific situation came about.

Immoral Criminals? An Experimental Study of Social Preferences Among Prisoners

This paper studies the pro-social preferences of criminals by comparing the behavior of a group of prisoners in a lab experiment with the behavior of a benchmark group recruited from the general population. We find a striking similarity in the importance the two groups attach to pro-social preferences in both in strategic and non-strategic situations. This result also holds when the two groups interact. Data from a large internet experiment,matched with official criminal records, suggest that our main finding from the lab experiment is not influenced by the additional scrutiny experienced by participants in prison.