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Wealth Preferences and Wealth Inequality: Experimental Evidence

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  • Nobuyuki Hanaki
  • Yuta Shimodaira

Abstract

Some researchers claim that a preference for wealth accumulation is the main cause of the long-run stagnation of the Japanese economy. A theoretical implication of people having such a preference, in particular of an assumption that the marginal utility of wealth accumulation has a positive lower bound while that of consumption does not, is the widening of wealth inequality. We experimentally test this theoretical prediction by inducing wealth preference in the laboratory. We found partial support for this prediction without the activation of participants’ status concerns. However, when the status concerns were activated by displaying the accumulated wealth ranking, that wealth inequality widened, especially when the initial inequality was large. These results suggest that status concern is an important reason behind wealth preference.

Suggested Citation

  • Nobuyuki Hanaki & Yuta Shimodaira, 2024. "Wealth Preferences and Wealth Inequality: Experimental Evidence," ISER Discussion Paper 1260r, Institute of Social and Economic Research, Osaka University, revised Feb 2025.
  • Handle: RePEc:dpr:wpaper:1260r
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    References listed on IDEAS

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    2. T. Parker Ballinger & Michael G. Palumbo & Nathaniel T. Wilcox, 2003. "Precautionary saving and social learning across generations: an experiment," Economic Journal, Royal Economic Society, vol. 113(490), pages 920-947, October.
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