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"Last-place Aversion": Evidence and Redistributive Implications

Author

Listed:
  • Ilyana Kuziemko
  • Ryan W. Buell
  • Taly Reich
  • Michael I. Norton

Abstract

Why do low-income individuals often oppose redistribution? We hypothesize that an aversion to being in "last place" undercuts support for redistribution, with low-income individuals punishing those slightly below themselves to keep someone "beneath" them. In laboratory experiments, we find support for "last-place aversion" in the contexts of risk aversion and redistributive preferences. Participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution. Similarly, in money- transfer games, those randomly placed in second-to-last place are the least likely to costlessly give money to the player one rank below. Last-place aversion predicts that those earning just above the minimum wage will be most likely to oppose minimum-wage increases as they would no longer have a lower-wage group beneath them, a prediction we confirm using survey data.

Suggested Citation

  • Ilyana Kuziemko & Ryan W. Buell & Taly Reich & Michael I. Norton, 2011. ""Last-place Aversion": Evidence and Redistributive Implications," NBER Working Papers 17234, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17234
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    2. Schüring, Esther & Gassmann, Franziska, 2012. "Whom to target: an obvious choice?," MERIT Working Papers 2012-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Esther Schüring & Franziska Gassmann, 2016. "The political economy of targeting – a critical review," Development Policy Review, Overseas Development Institute, vol. 34(6), pages 809-829, November.
    4. Rudolf Kerschbamer, 2013. "The Geometry of Distributional Preferences and a Non-Parametric Identification Approach," Working Papers 2013-25, Faculty of Economics and Statistics, Universität Innsbruck.
    5. Richard Murphy & Felix Weinhardt, 2013. "The Importance of Rank Position," CEP Discussion Papers dp1241, Centre for Economic Performance, LSE.

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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