How Does Economic Status Affect Social Preferences? Experimental Evidence from the US

Abstract

This paper investigates the impact of economic status on social preferences. We exogenously alter people’s perceived economic status by changing where they think their household stands in the US income distribution. Half of the people who over-estimated their position in the income distribution are told that they are relatively poorer than they thought. Conversely, half of those who under-estimated their position in the income distribution are informed that they are relatively richer than they thought. Then, participants play a series of four incentivized games, which measure different social preferences, such as trust, negative reciprocity, honesty and anti-sociality. We show that individuals who learn that they are lower in the income distribution than they thought send more money to their partner in the trust game, and demand a fairer split in the ultimatum game. They do not become significantly more honest or less likely to take money away from their partner. We also show that people who learn that they are relatively richer than they thought do not change their behaviour in any of the four games.