Leaky Bucket in the Real World: Estimating Inequality Aversion Using Survey Data
Existing evidence of inequality aversion relies on data from class-room experiments where subjects
face hypothetical questions. This paper estimates the magnitude of inequality aversion using representative survey data, with questions related to the real-economy situations the respondents face. The results reveal that the magnitude of inequality aversion can be measured in a meaningful way using survey data, but the estimates depend dramatically on the framing of the question. No matter how measured, the revealed inequality aversion predicts opinions on a wide range of questions related to the welfare state, such as the level of taxation, tax progressivity and the structure of unemployment benefits.
Keywords: Inequality aversion, social welfare functions, welfare state
JEL: D31, D63