Seminar

On the relative deservingness of capital and labor

Roberto Weber (Zurich University)

October 6, 2022, 11:00–12:30

Room Auditorium 4

Behavior, Institutions, and Development seminar

Abstract

The allocation of production rewards between capital and labor is a topic of long-standing interest to economists, with recent growing attention due to rising capital shares and inequality. We study, using pre-registered experiments with representative samples of the US and the Swiss populations, perceptions of fairness in the allocation of rewards to investment and work. Our design holds constant many factors that may influence individuals’ policy preferences over such allocations. In the experiment, two participants provide separate inputs to production, either in the form of monetary investment or work effort; a different participant allocates the production rewards between the investor and the worker. We find substantial heterogeneity in perceived deservingness, but also observe a tendency to allocate a greater share to labor than to capital. Our measure of the tendency to favor one input over the other predicts attitudes and policy-relevant voting behavior in support of policies that differentially reward capital and labor. Overall, our findings indicate that people perceive different input factors as differentially deserving and that such fairness views directly impact policy preferences. (Joint with Florian H. Schneider, Vanessa Valero, Roberto A. Weber)