Abstract
There is growing evidence on the roles of fairness and social preferences as fundamental human motives, in general, as well as in voting contexts. In contrast, models of political economy are based on sel…sh-voters who derive utility solely from ‘own’payo¤. We examine the implications of introducing voters with social preferences, as in Fehr and Schmidt (1999), in a simple general equilibrium model with endogenous labour supply. We demonstrate the existence of a Condorcet winner for voters, with heterogeneous social preferences (including purely sel…sh preferences), using the single crossing property of voters’preferences. Relatively small changes in the preference of voters can have relatively large redistributive consequences. We implications for the size of the welfare state; regional integration; and issues of culture, identity and immigration.
Highlights
Traditional economic theory relies on the twin assumptions of rationality and self-interested behavior
The purely sel...sh individual model is unable to explain a range of phenomena from many diverse areas such as collective action, contract theory, the structure of incentives, political economy and the results of several experimental games
We replace the self-interested voters in the Romer-Roberts-Meltzer-Richard (RRMR) framework with voters who have a preference for fairness (as in Fehr-Schmidt (1999)) and ask the following sorts of questions
Summary
Traditional economic theory relies on the twin assumptions of rationality and self-interested behavior. The latter is generally taken to imply that individuals are interested primarily in their own pecuniary payo¤s (sel...sh-preferences). This view is not always in conformity with the evidence. A substantial fraction of individuals exhibit social-preferences, i.e., care about the consumption and well being of others. Con‡icting evidence from a range of experimental games, such as the ultimatum game, the gift exchange game and the public-good game with punishment can be reconciled if we assume individuals to have social preferences.[1]
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