84 E.E. Rutström, M.B. Williams J. of Economic Behavior Org. 43 2000 75–89
Table 4 Total group and initial incomes
a
Session Total committee income
High initial income Low initial income
Productivity 1 437.00
58.00 14.50
Productivity 2 337.00
45.00 11.00
Productivity 3 172.00
23.00 6.00
Productivity 4 120.00
16.00 4.00
Effort 1, 2, 3 264.00
35.00 9.00
Random 760.00
40.00 0.00
a
n= 12 for all productivity and effort sessions; n=38 for random session.
Based on the shares presented in Tables 2 and 3 we can specify our hypotheses as follows: under hypothesis H
1
, subjects will not always choose the payoff-maximizing alternatives, where payoffs are maximized under distribution rule A for the higher income classes Initial
Income Groups “I” and “II” in the earnings treatments and “high” in the random treatment, and distribution rule D for the lower income classes Initial Income Groups “III”, “IV” and
“low”. Our experiment is not designed to reject this hypothesis, but we could reject its alternative, self-interested payoff maximization, if we observe a significant proportion of
choices other than A for the higher income groups and other than D for the lower income groups. Under hypothesis H
2 ,
1 ,
we would expect significantly fewer subjects to choose redistribution in the effort treatment than in any other treatment because more participants
would consider the high income subjects worthy. This hypothesis can therefore only be rejected based on a comparison of behavior across treatments. Hypothesis H
2 ,
2
, similarly, predicts that significantly fewer subjects will choose redistribution in the productivity treat-
ment compared to all the other treatments. If, for example, we find that all subjects in the higher income groups choose C in the productivity and random treatments, but A in the
effort treatment, and all subjects in the lower income groups choose D in the productivity and random treatments, but B in the effort treatment, we would reject hypothesis H
2 ,
2
but not hypothesis H
2 ,
1
.
4. Results
Our subjects consisted of graduate and undergraduate students from various colleges at the University of South Carolina. Twelve subjects participated in each of four productivity
sessions or groups and three effort sessions 84 subjects in total. Thirty-eight subjects participated in a single random entitlements treatment session.
Performance in Phase I was highly variable. Not only did this result in a high degree of variability in total group income across productivity groups, but also in a large degree of
variability in the relative size of possible dollar transfers. Table 4 presents total income as well as highest and lowest initial incomes for each session.
13
13
Comprehensive information on initial incomes and final payoffs for each distribution rule for all sessions is presented in Appendix A.
E.E. Rutström, M.B. Williams J. of Economic Behavior Org. 43 2000 75–89 85
Observed behavior in the productivity and effort sessions indicates that we cannot reject self-interest as the motivation for subjects’ choices. With one exception, all subjects in
the high initial income classes chose to keep their initial income distribution rule A. This distribution rule maximizes payoffs to income classes I and II.
14
All low income individuals income classes III and IV without exception chose full redistribution distribution rule D,
which maximizes payoffs to these income classes. This result is stable, not only across earnings treatments, but also across different group income levels.
15
In the random income entitlements treatment, we observe that 33 of the 38 subjects chose the distribution rule which maximized their immediate payoffs. Five subjects chose distri-
butions which did not maximize their immediate payoffs. Two of these were high income individuals; both chose distribution rule B payoffs of 30 and 10 to high and low income
classes, respectively. The fact that more high income subjects choose redistribution in this treatment relative to the earned entitlements treatments is consistent with earnings-based
justice the notion that an unequal distribution based on randomly assigned entitlements is unjust, but two of 38 subjects is not sufficient to reject the self-interest model of behavior.
Three low income individuals in the random entitlements treatment chose distributions which did not maximize their immediate payoffs; one chose rule B and two chose rule
C payoffs of 25 and 15 to high and low income classes, respectively. This behavior is contrary to an earnings-based justice concept, since input is the same for high and low income
individuals. It is, however, consistent with a property rights argument where the subject believes that high income individuals have rights to their “lottery winnings”.
16
Since the opportunity cost of time spent in the random treatment is relatively low, the cost of respecting
property rights in lottery winnings is low relative to the earned entitlements sessions.
17
These observations do not offer strong support for earnings-based preferences arising from either productivity or effort, as modeled in our design. This is not sufficient to generally
reject the existence of distributional preferences based on worthiness, however. It is an open
14
The one exception was an individual in a productivity session who was placed in initial income group II 43.50 in this particular session and who chose distribution rule D a final payoff of 36.50, or a transfer of 16 percent
of his initial income entitlement. This behavior is not consistent with productivity-based preferences, however, but is consistent with effort-based preferences.
15
It is worthwhile to emphasize the variation in group and initial incomes across the productivity sessions, as these differences imply variation in the absolute “price” of just, or fair, behavior. Nevertheless, we acknowledge that
even our lowest price may be “too high” for us to observe the expected variation in subjects’ choices, if revealing justice-based preferences has only a trivial value for subjects.
16
In pilot experiments incorporating random income entitlements, subject responses to debriefing questions suggested that subjects had diverse perceptions of property rights along the lines we discuss here.
17
We use the non-parametric McNemar test to determine if our treatment conditions have a significant effect on responses see Conover, 1980, pp. 144–146. This test is appropriate for out-of-sample data when responses
can be classified into one of two categories. Our sample is classified with respect to participation in random vs. earned entitlements treatments. Subject responses are categorized as “self-interested” and “non-self-interested”,
according to whether their choice maximizes their immediate payoff or not, respectively. The question to be asked is whether the treatment significantly alters the proportion of responses in these two categories. The value of
our test statistic is 8.0134, so we reject the null hypothesis at all conventional levels of significance. There does appear to be a significant difference in behavior with respect to random vs. earned income entitlements, although
the magnitude of the difference is small. The McNemar test is valid under the assumptions that each sample is a random sample and that the samples are mutually independent. Thus, this result should be qualified with respect
to the potential sample-selection biases plaguing all experimental studies.
86 E.E. Rutström, M.B. Williams J. of Economic Behavior Org. 43 2000 75–89
Table 5 Responses to debriefing questions
a
Question number Productivity
Effort High income n=24
Low income n=24 High income n=18
Low income n=18 1
2324 2124
816 813
2 2223
524 1015
715
a
Entries are ratios of Yes responses to total YesNo responses total responses will be less than n if subject responded “Do not know”.
question whether other mechanisms for allocating initial entitlements would cause subjects to choose distribution options in an apparently non-self-interested way. Nevertheless, our
findings are striking in comparison to the significance of such choices in earlier experiments as reviewed above.
It may be interesting to compare subjects’ actual choices to their statements about their perception of the “fairness” of the initial income distribution. Table 5 summarizes subject
responses to the following debriefing questions distributed at the end of the productivity and effort Phase II sessions:
1 Productivity: Do you think it is fair to determine the initial income distribution according to how few moves your solution required and to how many solutions you found?
Effort: Do you think it is fair to determine the initial income distribution according to how many moves participants made?
2 Both: Do you think your initial income in this part was determined in a fair way? Question 1 was intended to elicit subjects’ perceptions of the fairness of the entitlement
mechanism in determining the overall income distribution. Question 2 was intended to elicit subjects’ perceptions of the entitlement mechanism in determining the subject’s own
income. For most subjects, we find that their ex post statements of fairness in initial allo- cations are consistent with their actual choices over final distributions. This consistency is
most pronounced in the productivity treatment; most low-income subjects state that their initial income was unfairly determined though most state that the initial income distribu-
tion was fairly determined. In the effort treatment, however, we note that half of the low income subjects claim that the initial income distribution and their own initial income are
fairly determined, even though they choose full redistribution.
5. Conclusions
