Equality preference in the claims problem: a questionnaire study of cuts in earnings and pensions

We describe the results of a questionnaire in which Belgian and German students were confronted with nine claims problems. In these problems an amount of money has to be divided among individuals with differing claims and the total amount available falls short of the sum of the claims. Two versions of the questionnaire were presented to two different groups of respondents. The formal structure of the nine claims problems presented was identical in both versions but the economic context was different. In the ‘Firm’ version, respondents had to divide revenue among the owners of a firm who contribute to the activities of the firm in different degrees. In the ‘Pensions’ version, they had to divide tax money among pensioners who have paid different contributions during their active career. Responses in the Pensions version were more egalitarian than in the Firm version. For both versions, the proportional rule performs very well in describing the choices of the respondents. Other prominent rules—in particular the constrained equal awards and constrained equal losses rules—fail to capture some basic intuitions of the respondents. A substantial part of the respondents tend to become more progressive as the amount to be distributed decreases other things equal, and tend to become more progressive as the inequality in the distribution of claims becomes more unequal other things equal. All of these conclusions are robust with respect to the difference in home-country of the respondents. ∗We thank Bart Capéau, Frank Cowell, Luc Lauwers, Frans Spinnewyn, and Bertil Tungodden for their valuable comments and suggestions, and Kurt De Cock, Tina Lievens, and Lars Schwettmann for practical assistance in running the questionnaire. Any remaining shortcomings are ours. Financial support from the Fund for Scientific Research Flanders (grant G.0005.04) and the Interuniversity Attraction Poles network funded by the Federal Public Planning Service, Belgian Science Policy (grant P5/21-A) is gratefully acknowledged. †Center for Economic Studies, Katholieke Universiteit Leuven, Naamsestraat 69, B-3000 Leuven, Belgium. E-mail: [email protected] and [email protected].