This work expands the existing concepts of social preferences for the evaluation of income inequalities and distributions by the concept of equity aversion. This allows to express an individual interest into a certain degree of income inequality to the individual advantage over the members of the social reference group, when it comes to the evaluation of income inequalities or the individual behavior in situations that affect the income distribution. The main assumption is that this interest for the individual advantage is always strictly limited.
As an initial point, the paper shows how different questions of the evaluation and analysis of income distributions, their changes and individual behavior resulting from them are handled in Welfare Economics (macroeconomic level of the analysis) and in Experimental Economics and the Behavioral Contract Theory (microeconomic level of the analysis). This highlights the explicit concentration on egalitarian concepts, especially the relevance of the concept of inequality aversion. On this basis, other relevant concepts of social preferences are introduced and it is demonstrated what kind of implications and relevance they have for the evaluation of income inequality and the individual behavior in different situations of decision-making. The second major part of this work introduces the concept of equity aversion with all its important features, assumptions and implications in several steps. Thereby also the fundaments of the concept from already existing literature are reviewed. Based on this, it is shown how the combination of equity aversion and inequity aversion can be understood as an integrated concept of social preferences that results in a better economic description of different individual behavior. A critical review of the existing concepts of social preferences in retrospect demonstrates again in detail that up to now it has not been possible to demonstrate a positive interest in a limited degree of advantageous inequality as postulated by equity aversion. The paper moves then on to show how this limitation can be resolved by the new concept. The integration of the new concept into already existing models of social preferences completes this part of the work. As a result, it is also possible to describe equity aversion as a formal determinant of individual behavior and as a part of a concept of social preferences. Subsequent, supported by numerous examples from the literature, a critical acclaim is provided about the characteristics and the methods of Experimental Economics. Although this has been established as standard method for testing the relevance of concepts of social preferences, it is shown which fundamental difficulties can occur concerning the external validity of experimental results and why this tool seems to be inadequate especially for a verification of equity aversion. The search for evidence for the existence and relevance of equity aversion is then alternatively conducted by an analysis of empirical – mainly from surveys – and real economic data. Underpinned by indications from the existing literature this is done to find convincing evidence for equity aversion as a part of individual attitudes towards the distribution of income outside the controlled environment of an experiment. Taking into account equity aversion it becomes possible e.g. to explain the real political preferences in a
modified Downs-Model and to find a preference-based explanation for the concept of a distribution-equilibrium.
Overall this shows that, if the new concept is taken into account, it becomes possible to explain individual behavior and attitudes towards certain forms of income distributions with a concept of social preferences in situations in which this has not been possible before. A series of considerations concerning practical politico-economic implications for selected parts of the real economy – when the existence of equity aversion as a part of social preferences and their relevance for the society is incorporated – concludes the work.
All in all, the subject of this work is of great relevance both for the (mainly behavioral) economic literature and current social and political discussions. The new concept of equity aversion allows to explain certain individual assessments of income inequality and the individual position inside the income distribution that could have not been explained before. The combination of inequity aversion and equity aversion into a joint preference concept has generated a more comprehensive approach. This expands the scope of explainable forms of individual evaluations of income distribution and options towards income inequality. By doing this, the forecasts of preference-based concepts are brought closer to reality which reduces the existing explanatory deficits of the established approaches.
«This work expands the existing concepts of social preferences for the evaluation of income inequalities and distributions by the concept of equity aversion. This allows to express an individual interest into a certain degree of income inequality to the individual advantage over the members of the social reference group, when it comes to the evaluation of income inequalities or the individual behavior in situations that affect the income distribution. The main assumption is that this interest for...
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