Preference for Equality of Opportunity vs Equality of Outcomes: Experimental Evidence
Many important policy and managerial decisions involve uncertain outcomes that may affect people unequally. Often, these decisions involve a trade-off between equality of opportunities and equality of outcomes. For example, during a crisis, would people prefer that the government enact measures such as industry bailouts to ensure that most businesses survive but in some reduced capacity (outcome-oriented policy), or would they prefer that the government distributes resources or tax reliefs such that all businesses have more equal chance of survival but no business’s survival is guaranteed (opportunity-oriented policy)?
How people view the fairness of these decisions is vital in understanding people’s behaviour, compliance and support for policymakers and managers. For instance, if citizens have experiences with government that is contrary to their idea of fairness, they may emerge from those experiences less willing to comply with regulations and with less trust in institutions. These negative attitudes in turn make enforcement of regulations more difficult and can make the entire regulatory process less effective.
While a large literature in economics exists on people’s preference for fairness, most concern trade-offs between self and others (e.g. dictator games) instead of from a policymaker’s perspective. Moreover, only a few studies consider fairness in terms of trade-offs between equality of opportunities and equality of outcomes.
In this paper, we model and measure people’s preferences for equality of opportunities and equality of outcomes from a policymaker’s perspective. In particular, we design a novel, simple, yet powerful elicitation method to measure how decision makers trade-off between efficiency, equality of opportunities and equality of outcomes.
Using incentive compatible economic experiments, we study the behaviours of decision makers whose decisions affect how much other participants will be paid. We show that decision makers in our US sample have strong preferences for equality of outcomes when the decision has no uncertain outcomes. In line with existing literature, almost all decision makers would trade off efficiency to ensure that payoffs are equal across players. When outcomes are uncertain, most decision makers would trade off efficiency for equal opportunities. However, most of our subjects would not trade off efficiency for equal outcomes if opportunities are equal but outcomes are unequal. This is contrary to most inequity aversion models that would predict a preference for equality of outcomes.
This striking result has several important implications. First, existing inequality aversion models and results in the literature may fall short to explain behaviours when distributional outcomes are uncertain. Second, if policy decisions follow a strong preference for equal opportunities without a preference for equality of outcomes, while it can lead to better outcomes on average, it could also lead to widening inequalities.
How people view the fairness of these decisions is vital in understanding people’s behaviour, compliance and support for policymakers and managers. For instance, if citizens have experiences with government that is contrary to their idea of fairness, they may emerge from those experiences less willing to comply with regulations and with less trust in institutions. These negative attitudes in turn make enforcement of regulations more difficult and can make the entire regulatory process less effective.
While a large literature in economics exists on people’s preference for fairness, most concern trade-offs between self and others (e.g. dictator games) instead of from a policymaker’s perspective. Moreover, only a few studies consider fairness in terms of trade-offs between equality of opportunities and equality of outcomes.
In this paper, we model and measure people’s preferences for equality of opportunities and equality of outcomes from a policymaker’s perspective. In particular, we design a novel, simple, yet powerful elicitation method to measure how decision makers trade-off between efficiency, equality of opportunities and equality of outcomes.
Using incentive compatible economic experiments, we study the behaviours of decision makers whose decisions affect how much other participants will be paid. We show that decision makers in our US sample have strong preferences for equality of outcomes when the decision has no uncertain outcomes. In line with existing literature, almost all decision makers would trade off efficiency to ensure that payoffs are equal across players. When outcomes are uncertain, most decision makers would trade off efficiency for equal opportunities. However, most of our subjects would not trade off efficiency for equal outcomes if opportunities are equal but outcomes are unequal. This is contrary to most inequity aversion models that would predict a preference for equality of outcomes.
This striking result has several important implications. First, existing inequality aversion models and results in the literature may fall short to explain behaviours when distributional outcomes are uncertain. Second, if policy decisions follow a strong preference for equal opportunities without a preference for equality of outcomes, while it can lead to better outcomes on average, it could also lead to widening inequalities.