The Foundations of Social Policy Support: Experimental Evidence on How Institutional Quality Affects Redistributive Preferences
Abstract: We examine how variation in institutional quality—specifically tax evasion—influences individuals’ support for redistributive policies. While much is known about preferences for social policy, there is less research examining how institutions condition these preferences. To address this, we conduct laboratory experiments in the USA at the University of Colorado and in Russia at the Higher School of Economics. In our experiment, individuals vote on a tax rate which contributes to a common pot, complete a clerical task (or are randomly assigned to be unemployed), and then receive payment based on how well they complete the task and their portion of the common pot which is distributed equally. Participants play 3 rounds and vote on their preferred tax rate at the beginning of each round after being updated with information about their own productivity relative to the average and, when relevant, how prevalent underreporting is. In one version, participants are not allowed to cheat by underreporting their earnings. In the other versions, participants may underreport their earnings with either the same low risk of audit across individuals or a variable risk of audit across individuals. Contrary to conventional expectations, we find that highly productive individuals prefer more redistribution when they can easily avoid pay some or all of their taxes.