Preferences for redistribution and social structure

Abstract

We model inter-individual differences in preferences for redistribution as a function of (a) self-interest; (b) ideas about the deservingness of income differences due to luck, effort and talent; (c) subjective perceptions of the relative importance of these determinants for explaining the actual income distribution. Individuals base the latter on information obtained from their reference group. We analyse the consequences for redistributive preferences of homophilous reference group formation based on talent. Our model makes it possible to understand and integrate some of the main insights from the empirical literature. We illustrate with GSS data from 1987 how our model may help in structuring empirical work.