Ingvild Almås

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.

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.

The cost of living in China: Implications for inequality and poverty

China’s economic development in recent decades has been tremendous, but subject to debate. This paper calculates regional prices that make incomes comparable across both time and space using the Engel-curve approach. Incomes are adjusted using these price indices, providing new estimates of inequality and poverty development. Our findings contrast with measures based on the official consumer price indices (CPIs) – in a time characterized by high economic growth, we find a larger increase in inequality and a more moderate poverty reduction than what is indicated by the CPI-adjusted measures.

A Behaviour-based Approach to the Estimation of Poverty in India

Since the late 1970s, the price indices underlying the poverty lines in India have been updated using aggregate indices. Widespread criticism of these indices led to the adoption of a new official methodology in 2011 based on unit values from consumption survey data. We propose an alternative approach that identifies poverty from consumer behaviour, based on the notion that equally poor households spend the same proportion of their incomes on food. Compared with official estimates, we find higher levels of poverty in eastern India, and generally, smaller reductions in poverty from 2005 to 2010. Our poverty numbers are validated by the calorie composition of households around the poverty lines and self-reported hunger.

Global Income Inequality and Cost-of-Living Adjustment: The Geary-Allen World Accounts

Standard ways of measuring real income are known to be inconsistent with consumer preferences. We provide preference-consistent estimates of real income, based on the income-specific price indices that are consistent with nonhomothetic preferences. We find that existing measures, such as Geary, GEKS and GAIA, create systematic biases: the poorer is a country, the more its income is overestimated by these measures. Consequently, international income inequality is underestimated by the same measures.

Equalizing income versus equalizing opportunity: A comparison of the United States and Germany

Germany has lower posttax income inequality than the United States and hence is doing better according to a strict egalitarian fairness ideal. On the other hand, the United States is doing better than Germany according to a libertarian fairness ideal, which states that people should be held fully responsible for their income. However, most people hold intermediate (responsibility-sensitive) positions, and this paper studies fairness of the income distributions in Germany and the United States according to these positions. We find that only if peoples’ preferences are characterized by substantial degree of individual responsibility, the United States is considered less unfair than Germany. If we hold people responsible for the unexplained variation, the United States is considered fairer than Germany for all levels of responsibility sensitiveness. If we, on the other hand, demand compensation for the unexplained variation, Germany is fairer than the United States for all levels of responsibility. The latter may be seen as the preferred approach as it follows a “benefit of the doubt” strategy. To the best of our knowledge, this paper presents the first cross-country fairness comparison based on responsibility-sensitive ideals.

Baby Booming Inequality? Demographic Change and Inequality in Norway, 1967-2004

We demonstrate how age-adjusted inequality measures can be used to evaluate whether changes in inequality over time are because of changes in the age structure. In particular, we explore the hypothesis that the substantial rise in earnings inequality since the early 1980s is driven by the large baby boom cohorts approaching the peak of the age{earnings pro le. Using administrative data on earnings for every Norwegian male over the period 1967{2004, we nd that the impact of age adjustments on the trend in inequality is highly sensitive to the method used:while the most widely used age-adjusted inequality measure indicates that the rise in inequality in the 1980s and 1990s is indeed driven partly by the baby boom, a new and improved age-adjusted measure indicates the opposite, namely that the rise in inequality was even larger than what the inequality measures unadjusted for age reveal.

Older or Wealthier? The Impact of Age Adjustment on Wealth Inequality

Differences in individual wealth holdings are widely viewed as a driving force of economic inequality. However, as this finding relies on cross‐sectional data, a concern is that older is confused with wealthier. We propose a new method to adjust for age effects in cross‐sections, which eliminates wealth inequality due to age, yet preserves inequality arising from other factors. Using a new cross‐country comparable database, we examine the impact of age adjustments on wealth inequality across countries and over time. We find that the most widely used method yields a substantially different picture of age‐adjusted wealth inequality than our method.

Cutthroat Capitalism versus Cuddly Socialism: Are Americans more Meritocratic and Efficiency-Seeking than Scandinavians?

There is a striking difference in income inequality and redistributive policies between the United States and Scandinavia. To study whether there is a corresponding cross-country difference in social preferences, we conducted the first large-scale international social preference experiment, with nationally representative samples from the United States and Norway. We introduce a new experimental approach, which combines the infrastructure of an international online market place and the infrastructure of a leading international data collection agency. A novel feature of our experiment is that Americans and Norwegians make real distributive choices in identical situations where they have complete information about the source of inequality and the cost of redistribution. We show that Americans and Norwegians differ significantly in fairness views, but not in the importance assigned to efficiency. The study also provides robust causal evidence of fairness considerations being much more fundamental for inequality acceptance than efficiency considerations in both countries.

Measuring and Changing Control: Women's Empowerment and Targeted Transfers

This paper studies how targeted cash transfers to women affect their empowerment. We use a novel identification strategy to measure womens willingness to pay to receive cash transfers instead of their partner receiving it. We apply this among women living in poor households in urban Macedonia. We match experimental data with a unique policy intervention (CCT) in Macedonia offering poor households cash transfers conditional on having their children attending secondary school. The program randomized whether the transfer was offered to household heads or mothers at municipality level, providing us with an exogenous source of variation in (offered) transfers. We show that women who were offered the transfer reveal a lower willingness to pay, and we show that this is in line with theoretical predictions.