Not all luck is created equal: Sources of income inequality and willingness to redistribute

Abstract

Despite steadily rising inequality in the US over the last few decades, demand for increasing tax rates and redistribution has not increased. A growing literature argues that one reason for this is that people might perceive inequality to be fair. This literature has documented that Americans tend to perceive economic inequality stemming from merit as being fair and inequality stemming from luck as unfair. However, “lucky breaks” in the real world do not necessarily come from a lottery or random chance but from the actions of the government favoring a “lucky” few. People might be more willing to redistribute if it compensates those negatively affected by government action. Using an online experiment we show that luck stemming from the action of a government-like actor influences individuals’ desire to redistribute earnings making them more likely to favor redistribution than in instances where inequality is caused by merit or by random luck.