NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Equity Concerns are Narrowly Framed

Christine L. Exley, Judd B. Kessler

NBER Working Paper No. 25326
Issued in December 2018, Revised in July 2019
NBER Program(s):Public Economics

We show that individuals narrowly bracket their equity concerns. Across four experiments including 1,600 subjects, individuals equalize components of payoffs rather than overall payoffs. When earnings are comprised of "small tokens" worth 1 cent and "large tokens" worth 2 cents, subjects frequently equalize the distribution of small (or large) tokens rather than equalizing total earnings. When payoffs are comprised of time and money, subjects similarly equalize the distribution of time (or money) rather than total payoffs. In addition, subjects are more likely to equalize time than money. These findings can help explain a variety of behavioral phenomena including the structure of social insurance programs, patterns of public good provision, and why transactions that turn money into time are often deemed repugnant.

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Document Object Identifier (DOI): 10.3386/w25326

 
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