DP5368 The Role of Equality and Efficiency in Social Preferences

Author(s): Ernst Fehr, Michael Naef, Klaus M. Schmidt
Publication Date: November 2005
Keyword(s): inequity aversion, preferences for efficiency, social preferences
JEL(s): C7, C91, C92, D63, D64
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5368

Engelmann and Strobel (AER 2004) question the relevance of inequity aversion in simple dictator game experiments claiming that a combination of a preference for efficiency and a Rawlsian motive for helping the least well-off is more important than inequity aversion. We show that these results are partly based on a strong subject pool effect. The participants of the E&S experiments were undergraduate students of economics and business administration who self-selected into their field of study (economics) and learned in the first semester that efficiency is desirable. We show that for non-economists the preference for efficiency is much less pronounced. We also find a non-negligible gender effect indicating that women are more egalitarian than men. However, perhaps surprisingly, the dominance of equality over efficiency is unrelated to political attitudes.