Luck or rights? An experiment on preferences for redistribution following inheritance of opportunity

Abstract

We conducted an experiment to examine whether individuals are more likely to support the redistribution of income stemming from the inequality of inherited opportunities. Specifically, we randomly and anonymously paired two strangers in a lab setting to determine whether the source of the opportunity from the ‘testator’ subjects influences the ‘heir’ subjects’ redistributive decisions. We find that, on average, the highest level of redistribution occurs among heirs who received their winning opportunity through pure luck. This result, which is robust to controlling for personal characteristics and ex-ante transfer, supports the meritocratic fairness hypothesis, which posits that individuals generally perceive endowment generated by luck as less deserving than by effort. However, we discovered that redistribution is, on average, similar between subjects who won through their own efforts and those who won because of having inherited someone else's effort. This is in line with the ‘inheritance entitlement hypothesis’, which suggests an internalization of inheritance when the narrative of effort is passed down from the testator to the heir. Thus, our results suggest that people feel less entitled to bequests and inheritance when the randomness of inheritance is made more salient to them.