Abstract
Ideas about what is ‘fair' influence preferences for redistribution. We study the dynamic evolution of different economies in which redistributive policies, perception of fairness, inequality and growth are jointly determined. We show how including beliefs about fairness can keep two otherwise identical countries on different development paths for a very long time. We show how different initial conditions regarding how ‘fair' is the same level of inequality can lead to two permanently different steady states. We also explore how bequest taxation can be an efficient way of redistributing wealth to correct ‘unfair' past accumulation of inequality.
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