Vanessa Valero, Loughborough University
Title: “Preferences for the allocation of production rewards between capital and labor” (with Florian Schneider and Roberto Weber).
Abstract: The allocation of production rewards between capital and labor has long been of interest to economists. Recently, rising capital shares and inequality have renewed interest in this topic. We use pre-registered experiments with representative samples of the US and the Swiss populations to study perceptions of fairness in the allocation of rewards to capital and labor. Our design holds constant many factors that may influence individuals’ policy preferences over such allocations. In the experiment, two participants provide separate inputs to production, either in the form of monetary investment or work effort. A different participant allocates the production rewards between the investor and the worker. While we find substantial heterogeneity in the perceived fair shares, we also observe a tendency to allocate a greater share to labor than to capital. We further find that our measure of the tendency to favor one input over the other predicts attitudes towards policies that differentially reward capital and labor. Overall, our findings indicate that people perceive some input factors as more deserving than others and that such fairness views matter for policy preferences.