First, the average height of the white bars is significantly lower than the black ones 0. This means that randomly endowing subjects gave rise to a more egalitarian distribution attitude. Groups strove towards wiping out inequality caused by chance rather than effort. Second, the white bars seem to replicate the black-bar pattern produced by the contest. The situation with majority vote and right-skewed initial endowment exhibits the lowest distribution parameter of only. Table 3 gives the difference of the group mean of between contest and random endowment by quorum and prize scheme.
All mean differences exhibit the expected sign and are significantly greater than zero at least at the 5 percent level. All other pairwise difference tests are insignificant. In other words, if at all, individual effort in terms of success in a contest is acknowledged by a group majority only if the prize scheme is symmetric and the distribution of the surplus is determined by the majority vote. Despite the general acceptance of the outcome of the contests, groups on average agreed on a distribution parameter close to 0. This setup was also associated with highest group effort 9.
The acceptance of the outcome of the contest shrunk dramatically with a right-skewed prize scheme. In this situation the majority agreed willingly on counteracting ex-ante inequality by imposing the difference principle. Hence, default rates shrunk, but at the cost of lower effort. The unanimity requirement obviously shifted the focus away from effort towards cooperation in order to obtain the surplus.
In that situation groups geared themselves to equal sharing combined with a small correction for ex-ante inequality. The respective -values fall below 0. In this paper, we experimentally test if both the existence of a middle class and institutional hurdles can protect the most able members of the society from the demand of the least able for excessive income distribution policies Protection Hypothesis.
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We operationalized the institutional rule by the quorum needed for a group decision majority versus unanimity and the social structure by the existence of a middle class in contrast to a winner-take-all society. Moreover, we have argued that setting up institutional hurdles is inferior to relying on a middle class as institutional hurdles involve efficiency losses due to bargaining impasses Efficiency Hypothesis.
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The experiment directly tests our main hypotheses. The existence of a neutral middle class is as effective as institutional hurdles to protect the rich from being expropriated. Hereby, the middle class balances the interests of the poor and the rich. The middle class does not have an interest in excesses from one side because redistribution shifts money from the rich to the poor. We argue that the middle class can be interpreted as an uninvolved spectator who has no interest to favor one group over another. Institutional hurdles come at the cost of significantly less efficiency in terms of higher default rates.
Hereby, a higher default rate means that the payoff for both the rich and the poor is lower. Even, at the individual level, we could observe that subjects expend more effort if the prize scheme involved a moderating middle player. The corroboration of both hypotheses allows us to draw the conclusion that the middle class is the efficient protection of the rich.
We contribute to the literature about why the rich do not get expropriated. Leaving aside the branch of the literature which summarizes the reasons of why the poor do not expropriate the rich e. Although any extrapolation of our laboratory results has to be done carefully, we note that our finding that collective decisions have been less equalizing and more efficient under the majority rule with a neutral middle player than in groups with a right-skewed prize structure resonates well with the empirical data, supporting the warnings about the impact of rising inequality on societal stability and economic growth in contemporary societies.
Coming back to the empirical findings in the introduction: not only the middle class itself but also the rich should have an interest in bracing against the erosion of the middle class. See Tables 4 , 5 , and 6. Please do not talk to other participants during the entire experiment! During the experiment, you have to make several decisions. Your individual payoff depends on your own decision and the decisions of your group members due to the following rules. You will be paid individually, privately, and in cash after the experiment.
During the experiment, we will talk about Tokens as the experimental currency. After the experiment, Tokens will be transferred into Euros with the following exchange rate: Please take your time reading the instructions and making your decisions. You are not able to influence the duration of the experiment by rushing through your decisions because you always have to wait until the remaining participants have reached their decisions. The experiment is completely anonymous. At no time during the experiment or afterwards will the other participants know which role you were assigned to and how much you have earned.
If you have any questions please raise your hand. One of the experimenters will come to you and answer your questions privately. Following this rule is very important. Otherwise the results of this experiment will be worthless for scientific purposes. You will receive a show-up fee of 5 Euros for your participation. Depending on your decisions and the decisions of the other participants you can additionally earn up to Tokens 36 Euros. The expected duration of the experiment is 90 minutes.
The exact course of the experiment will be described in the following. The experiment consists of 8 rounds which all follow the same course. In each round participants will be randomly and repeatedly assigned to groups of three members. Your payoff will be determined only by your own decisions and decisions of the other group members. Decisions of the other groups do not affect your payment. The final decisions are anonymous within each group. After the group assignment, a knowledge test follows in the control treatments, ranks were assigned by a random generator instead of the knowledge test.
The more questions you answer correctly in the knowledge test, the higher your potential payoff at the end of the experiment will be.
The knowledge test consists of various tasks. For each correctly solved task you receive one point; each question you answered incorrectly, a point is subtracted, and for not answering questions you do not get any points. Based on the collected points you will be assigned a rank within the group. The player with the highest score in the knowledge test gets the highest rank rank 1 and also the highest token endowment.
The player with the lowest number of collected points will be assigned the lowest rank rank 3 and also the lowest token endowment.
The knowledge test is designed with a time restriction of seconds for 10 screens with different tasks. The tasks come from different fields. Each question has only one correct answer. You have 15 seconds per question. Please pay attention to the time restriction in the upper right corner of the screen. By clicking on the OK button you can get to the next screen. After a total of seconds, the knowledge test stops and the collected points are summed up.
The ranks and the associated endowments will be provided after the knowledge test, explanations, and further instructions. You have collected points in the knowledge test. According to the collected points of all group members each group member will be assigned a rank and a certain endowment of tokens. The token endowment varies from round to round. A total of 8 rounds will be played. The sequential arrangement of token distributions will be chosen randomly.
In the experiment, you will see on the next screen your own rank and token endowment and the ranks and token endowments of your group members. In the following you and your group members have to determine the distribution parameter. You should set a distribution parameter which distributes tokens between the group members in such a way that your preferences are met.
The payoff of the group member at the end of the experiment is then calculated as follows: Distribution only takes place when at least 2 3 , under unanimity rule group members choose the same distribution parameter. The chosen distribution parameter determines the final distribution within the group in that period.
Sample calculation: player 1 has 3 tokens, player 2 has 5 tokens, and player 3 has 10 tokens. The payoff for player 1 is The computer calculates the payoffs under the assumption that the distribution parameter you make is the relevant distribution parameter which will be implemented. If not at least 2 3, under unanimity rule players from the group typed in the same distribution parameter, no distribution takes place and players receive only their token endowment determined by their rank in the knowledge test.
The same would apply to the endowments of the remaining players. You have the possibility to chat with the other group members in a joint chat room. You can chat freely restricted in the way that you can only type in numbers between 0 and , under restricted communication rule and discuss which distribution parameter is to be implemented, but you are not allowed to reveal your identity. Chat time is restricted to 3 minutes. If not at least 2 3, under unanimity rule players have entered the same distribution parameters in time and have confirmed their chosen distribution parameters by clicking the OK button, then no distribution will take place.
The calculator is available to you for trying out different distribution parameters. To get an impression about the chat structure, the endowments and the tokens, and the calculator, a sample screen is given below. In the upper part of the screen you see the group chat room. The rank number of each player is displayed directly above and within the chat window. In the lower part of the screen the ranks and tokens of all group members before and after distribution are displayed. In the right field, you can enter as often as you wish different distribution parameters to calculate the final token distribution.
Dividing the sum by 3 gives 3 Tokens to be distributed to each group member. The final distribution then is given by , , and Tokens. For example, using the equation given above, the payoff of player 3 would be given by Pressing the OK button confirms and completes the decision.
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One of the 8 rounds is randomly selected for payoff. Each round could therefore be payoff relevant. Individual payoffs will be calculated according to the chosen distribution parameter and the rules stated above. The experiment will begin shortly. If you have questions, please raise your hand and wait quietly until an experimenter comes to you. Speaking with other participants is strictly prohibited throughout the experiment. Thank you and have fun in the experiment. The authors declare that there is no conflict of interests regarding the publication of this paper.
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Table of Contents Alerts. Abstract We study the effect of competition on income distribution by means of a two-stage experiment.
Introduction In recent years, public awareness of an increasingly lopsided distribution of income and wealth in Western countries has strongly increased [ 1 ]. Literature Review If we assume that subjects solely follow self-interest and that self-interest is directly expressed in a social contract with a corresponding level of redistribution, we find ourself in the world of the median voter theorem [ 23 ]. Theoretical Framework In this section, we introduce the theoretical framework of our experiment in order to derive testable hypotheses.
The Contest Following Moldovanu and Sela [ 22 ], we consider a contest with three prizes , where. The Demand Game The second task is a variation of the Nash demand game [ 54 ]. Focal Points and Hypotheses The demand game outlined in the previous subsection has three potential focal points which correspond to different distribution principles or fairness norms. Figure 1: Sharing a surplus. The figure shows the gross payoffs of players horizontal axis and and vertical axis for sharing a surplus of with a right-skewed distribution of prizes.
Three focal points egalitarian , equal sharing , and proportional sharing are depicted together with their corresponding values of the distribution parameter. Figure 2: Mean effort. The figure shows mean group effort in points by treatment and prize scheme. Figure 3: Default rates. The figure shows the default rate by treatment and prize scheme. Figure 4: Distribution parameter. The figure shows the mean of the distribution parameter by treatment and prize scheme.
References T. Singh and G. Seidl, K. Pogorelskiy, and S.
Frank and P. Hacker and P. Pierson, Winner-Take-All Politics. View at Google Scholar T. DiPrete and G.
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Franck and S. Alesina and G. Buchanan and G. Tullock, The Calculus of Consent. Miller and C. Glaeser, J. Scheinkman, and A. Arts and J. Steijn, and D. Moldovanu and A. Meltzer and S. Alesina and R. Benabou and E. Roemer and W. Frohlich and J. Traub, C. Seidl, U. Schmidt, and M. Gaertner and E. Schokkaert, Empirical Social Choice. Klor and M. Check the instructions to authors if the publisher offers a LaTeX template for this journal. Journal articles Those examples are references to articles in scholarly journals and how they are supposed to appear in your bibliography.
A journal article with 1 author. Abbott A. Membrane proteins: channel voyager makes waves. A journal article with 2 authors. Multiple volcanic episodes of flood basalts caused by thermochemical mantle plumes. A journal article with 3 authors. Public health. Is polio eradication realistic? A journal article with 7 or more authors. Lane D. Berlin, Heidelberg: Springer; Uniform Measures. In: Pogorelskiy K, Traub S, editors. Davis J. IFLScience; [cited Oct 30]. The experimental test confirms our initial hypothesis that the existence of a middle class is as effective as institutional hurdles in limiting the power of the less able in order to protect the more able players from being expropriated.
Furthermore, majoritarian voting with a middle class involves fewer bargaining impasses than granting veto rights to the more able players and, therefore, is more efficient. Source J. Read more about accessing full-text Buy article. Abstract Article info and citation First page References Abstract We study the effect of competition on income distribution by means of a two-stage experiment.
Article information Source J. Export citation. Export Cancel. References T. Singh and G. Seidl, K. Pogorelskiy, and S. Frank and P. Hacker and P. Pierson, Winner-Take-All Politics. DiPrete and G. Franck and S. Alesina and G. Buchanan and G. Tullock, The Calculus of Consent. Miller and C. Glaeser, J.