Cutthroat capitalism versus cuddly socialism: Are Americans more meritocratic and efficiency-seeking than Scandinavians?

Abstract

There are striking differences in inequality and redistribution between the United States and Scandinavia. To study whether there are corresponding differences in social preferences, we conducted a large-scale international social preference experiment where Americans and Norwegians make distributive choices in identical environments. Combining the infrastructure of an international online labor market and that of a leading international data collection agency, we show that Americans and Norwegians differ significantly in fairness views, but not in the importance assigned to efficiency. In particular, we find that Americans accept significantly more inequality than Norwegians, even when they make distributive choices in identical situations. The study also provides general insights into the nature of social preferences. We provide causal evidence suggesting that fairness considerations are more fundamental for inequality acceptance than efficiency considerations. In both countries, merit instead of luck as the source of inequality causes a huge increase in inequality acceptance, while the introduction of a cost of redistribution has a negligible effect on the distributive choices of the participants.