Abstract
Meritocracy is a prominent moral ideal in many societies, but often difficult to apply since there is typically limited information about why people differ in their performance. This paper reports from a theoretical and experimental investigation of how limited information affects inequality acceptance. In a general theoretical framework, we show that Bayesian meritocrats implement less inequality with limited information than with full information if limited information causes uncertainty about who deserves the higher income (fairness ranking uncertainty). Irrational meritocrats may diverge in their inequality acceptance when there is limited information: in many economic environments, signal neglecting meritocrats implement the egalitarian solution, while base rate neglecting meritocrats implement the libertarian solution. Hence, differences in belief updating may be as important as differences in fairness views in accounting for disagreements about inequality. The analysis also shows that limited information may cause an increase in inequality acceptance if enough people are base-rate neglecting meritocrats and interpret earnings as an indicator of expected performance. In the experimental part of the paper, we study a special case of the general theoretical framework, and we show that irrational updating is essential for explaining distributive behavior of third-party spectators. We show how heterogeneity both in fairness views and belief updating can be captured in a structural behavioral model, and provide a novel comparison of two different approaches to belief elicitation by comparing beliefs inferred from choice data and beliefs elicited using a scoring rule. The results contribute to a better understanding of the foundations of inequality acceptance in society.
Invited by: Riccardo Ghidoni
Local Organizer: Stefania Bortolotti