Fairness and inequality : measuring fairness preferences and identifying the unfair income inequality in Germany
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The standard measures of economic inequality seem not to be in accordance with the way people tend to think about inequality. Rather than considering all economic inequality unfair, people seem to accept inequalities arising from some sources of income, while rejecting those arising from other sources. Following and extending the framework of Almås et al. (2011), this thesis sheds light on the difference between actual, unfair, and believed unfair inequality. The notion of an unfair outcome is captured by evaluating whether an individual should be held responsible for that particular outcome. We ask a representative sample in Germany which factors they think should play an important role in determining a person’s income, and which factors they think do play an important role in determining a person’s income. These statements identify fairness views and beliefs about the income generating process. To our knowledge, this is the first time that surveyed fairness views are applied in the generalised Gini framework developed by Almås et al. (2011). This framework allows responsibility-sensitive fairness theories distinguish between actual and unfair inequality. We expand this model to allow for the measurement of believed unfairness, and suggest a principle of evidence-based beliefs to address unexplained variation. We argue that the prevailing “responsibility cut” in the representative sample may correspond to the luck egalitarian fairness theory. Our results show that the level of unfair income inequality is greater than the actual income inequality in Germany. The believed unfair inequality is considerably lower than both actual and unfair inequality. Unfair inequality has increased more than actual inequality from 1984 to 2013, and believed unfairness has decreased since 1984. Furthermore, redistribution reduces more actual inequality than unfair inequality, a gap that has increased over the last thirty years.