How inequality, fairness concerns, and norms affect individual behaviour

Hochleitner, Anna (2023) How inequality, fairness concerns, and norms affect individual behaviour. PhD thesis, University of Nottingham.

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This thesis consists of three self-contained chapters that study different facets of individual decision-making and show that human behaviour is strongly influenced by the social and economic environment we are interacting within. While Chapters 1 and 2 focus on the topics of social inequality and fairness concerns, Chapter 3 explores the impact of norms on behaviour.

Chapter 1 investigates the effect of increasing inequality on social stability. While a relationship seems intuitive, the empirical evidence is rather mixed. This chapter employs a different approach from previous literature and isolates the concepts of inequality and instability in an experiment. The setting is a repeated game, where individuals interact in groups and have an incentive to coordinate on different actions. Once coordination has emerged, the experiment exogenously varies the extent of inequality between both actions. The results show that increasing inequality has a destabilising effect. The group that is disadvantaged by the current status quo is thereby the driver of the destabilisation. This behaviour is consistent with a theoretical framework based on disadvantageous inequality aversion and myopic best response. Certain characteristics, such as the poor getting poorer or a sudden jump rather than a gradual increase in inequality aggravate the destabilising effect. Moreover, people respond differently to the same level of inequality depending on their past experiences.

Chapter 2 studies how negative economic shocks affect redistributive preferences. Informed by a theoretical framework, the chapter uses an experiment that exogenously varies individuals' experience of negative income shocks before they decide how to redistribute resources. Moreover, the setting introduces differences in relative income, distinguishing between poorer individuals who benefit from redistribution and richer individuals who benefit from the status quo. The results provide causal evidence that poorer and richer individuals hold different fairness views, with the poor favouring higher levels of redistribution. Moreover, these differences in fairness views translate into different responses to income shocks. While poorer individuals do not respond to shocks, richer individuals become more opposed to redistribution when they experience a shock themselves, but more supportive of redistribution if poorer individuals are affected. A follow-up study extends and largely confirms these findings by bringing real world income shocks caused by Covid-19 into the experiment.

Chapter 3 focuses on descriptive norms - the behaviour of other individuals in one's reference group – and how they shape individual decisions. When characterising the behaviour of others, a standard approach in the literature is to focus on average behaviour. This chapter, however, shows both theoretically and empirically that not only averages but also the entire distribution of behaviour matters for how people react to norms in strategic settings. Inspired by the literature on tight and loose cultures, the focus is thereby on the distinction between tight (low variance), loose (high variance), and polarised (u-shaped) environments. Using an experiment with a representative sample of the U.S. population, the results show that individuals strongly respond to differences in the variance and shape of the norm they are facing. Loose norms generate greater behavioural variance, while polarisation generates polarised responses. Moreover, compared to tight norms, in polarised and loose environments, personal traits and values play a significantly larger role in determining actual behaviour.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Barr, Abigail
Sonderegger, Silvia
Keywords: Decision making; Equality; Income distribution; Social stability; Fairness; Social norms; Human behavior
Subjects: H Social sciences > HM Sociology
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > School of Economics
Item ID: 73592
Depositing User: Hochleitner, Anna
Date Deposited: 25 Jul 2023 04:40
Last Modified: 25 Jul 2023 04:40

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