Discussion Paper No. 515
November 1, 2024
Just Cheap Talk? Investigating Fairness Preferences in Hypothetical Scenarios
Author:
Abstract:
The measurement of preferences often relies on surveys in which individuals evaluate hypothetical scenarios. This paper proposes and validates a novel factorial survey tool to measure fairness preferences. We specifically examine whether a non-incentivized survey captures the same distributional preferences as an impartial spectator design, where choices may apply to a real person. In contrast to prior studies, our design involves high stakes, with respondents determining a real person’s monthly earnings, ranging from $500 to $5,700. We find that the non-incentivized survey module yields nearly identical results compared to the incentivized experiment and recovers fairness preferences that are stable over time. Furthermore, we show that most respondents adopt intermediate fairness positions, with fewer exhibiting strictly egalitarian or libertarian preferences. These findings suggest that high stake incentives do not significantly impact the measurement of fairness preferences and that non-incentivized survey questions covering realistic scenarios offer valuable insights into the nature of these preferences.
Keywords:
Fairness preferences; Survey experiment; Vignette studies;
JEL-Classification:
C90; D63; I39;
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Discussion Paper No. 421
September 11, 2023
Automation and Polarization
Author:
Abstract:
We develop an assignment model of automation. Each of a continuum of tasks of variable complexity is assigned to either capital or one of a continuum of labor skills. We characterize conditions for interior automation, whereby tasks of intermediate complexity are assigned to capital. Interior automation arises when the most skilled workers have a comparative advantage in the most complex tasks relative to capital, and because the wages of the least skilled workers are sufficiently low relative to their productivity and the effective cost of capital in low-complexity tasks. Minimum wages and other sources of higher wages at the bottom make interior automation less likely. Starting with interior automation, a reduction in the cost of capital (or an increase in capital productivity) causes employment and wage polarization. Specifically, further automation pushes workers into tasks at the lower and upper ends of the task distribution. It also monotonically increases the skill premium above a skill threshold and reduces the skill premium below this threshold. Moreover, automation tends to reduce the real wage of workers with comparative advantage profiles close to that of capital. We show that large enough increases in capital productivity ultimately induce a transition to low-skill automation and qualitatively alter the effects of automation - thereafter inducing monotone increases in skill premia rather than wage polarization.
Keywords:
assignment; automation; inequality; polarization; tasks; wages;
JEL-Classification:
J23; J31; O33;
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Discussion Paper No. 420
August 31, 2023
Redistributive Income Taxation with Directed Technical Change
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Abstract:
What are the implications of (endogenous) directed technical change for the design of redistributive income taxes? I study this question in a Mirrleesian economy augmented to include endogenous technology development and adoption choices by firms. Under certain conditions, any progressive tax reform induces technical change that compresses the pre-tax wage distribution. The key intuition is that progressive tax reforms tend to increase labor supply of less skilled relative to more skilled workers, which induces firms to develop and use technologies that are more complementary to the less skilled. These directed technical change effects make the optimal tax scheme more progressive, raising marginal tax rates at the right tail of the income distribution and lowering them at the left tail. For reasonable calibrations, the impact of directed technical change on the optimal tax is quantitatively important: optimal marginal tax rates are reduced substantially for incomes below the median and increase monotonically over the bulk of the income distribution instead of being U-shaped (as in most of the previous literature).
Keywords:
optimal taxation; directed technical change; endogenous technical change; wage inequality;
JEL-Classification:
H21; H23; H24; J31; O33;
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Discussion Paper No. 405
June 30, 2023
The Taxation of Couples
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Abstract:
Are reforms towards individual taxation politically feasible? Are they desirable from a welfare perspective? We develop a method to answer such questions and apply it to the US federal income tax since the 1960s. Main findings are: As of today, Pareto-improvements require a move away from joint taxation. Revenue-neutral reforms towards individual taxation are not Pareto-improving, but attract majoritysupport. Such reforms are rejected by Rawlsian welfare measures and supported by ones with weights that are increasing in the secondary earner’s income share. Thus, there is a tension between the welfare of “the poor” and the welfare of “working women.”
Keywords:
taxation of couples; tax reforms; optimal taxation; political economy; non-linear income taxation;
JEL-Classification:
C72; D72; D82; H21;