Property, redistribution, and the status quo: a laboratory study

Konstantin Chatziathanasiou,Michael Kurschilgen,Svenja Hippel

doi:10.1007/s10683-020-09685-5

Abstract

We report experimental evidence showing a positive effect of redistribution on economic efficiency via the self-enforcement of property rights, and identify which status groups benefit more and which less. We model an economy in which wealth is produced if players voluntarily comply with the—efficient but inequitable—prevailing social order. We vary exogenously whether redistribution is feasible, and how it is organized. We find that redistribution benefits all status groups as property disputes recede. It is most effective when transfers are not discretionary but instead imposed by some exogenous administration. In the absence of coercive means to enforce property rights, it is the higher status groups, not the lower status groups, who benefit from redistribution being compulsory rather than voluntary.

Highlights

How does redistribution affect a person’s economic status? Conceiving redistribution as a means to channel wealth from the relatively rich to the relatively poor, the answer is pretty straightforward: it helps the poor, and hurts the rich
We study a situation without property right enforcement, in which inequality stems from agents being differently privileged in the prevalent order
Efficiency improves to 67% in T-direct (p = .003) and 64% in T-pool (p = .016) but still falls significantly short of the bourgeois equilibrium prediction

Summary

Introduction

How does redistribution affect a person’s economic status? Conceiving redistribution as a means to channel wealth from the relatively rich to the relatively poor, the answer is pretty straightforward: it helps the poor, and hurts the rich. How does redistribution affect a person’s economic status? Redistribution might have a positive effect on economic efficiency by reducing conflict over property rights (Grossman 1994, 1995; Bös and Kolmar 2003; Dal Bó and Dal Bó 2011). To this day there is no causal empirical evidence for such an effect. Using a novel experimental paradigm, we test how redistribution affects efficiency via the self-enforcement of property rights, and identify which status groups benefit more and which less.

Methods

Results

Conclusion