More from the Author

• Article | American Economic Review | 2013

  A Note on Fairness and Redistribution

  Rafael Di Tella and Juan Dubra

  In an influential paper, Alesina and Angeletos (2005)—henceforth, AA—argued that a preference for fairness could lead two identical societies to choose different economic systems. In particular, two equilibria might arise: one with low taxes and a belief that the income-generating process is "fair" because effort is important (an "American" equilibrium) and another with high taxes and the belief that the process is "unfair" because luck prevails. Piketty (1995) had shown that a similar pattern could arise from standard preferences if initial beliefs about the relative importance of effort and luck in generating income differed across the two societies, while Benabou and Tirole (2006) study this issue using more realistic preferences (Buera, Monge-Naranjo, and Primiceri 2011 discuss the evolution of beliefs about economic systems). A key contribution of AA is to obtain these two equilibria from identical societies assuming agents prefer outcomes that are fair, an important modification because fairness considerations seem central in the demand for redistribution, and because in several settings (as in some ultimatum games) such preferences for fairness can lead to large (material) inefficiencies. In this note we report a difficulty we encountered when interpreting the results in AA: we find multiplicity (and demand for redistribution) even if luck plays no role. In other words, there is multiplicity even if the equilibrium tax rate is independent of the signal-to-noise ratio (a quantity that expresses how important effort is, relative to luck, in the determination of income). This conflicts with the notion that the signal-to-noise ratio plays a central role in generating multiplicity with AA preferences for fairness.

  Keywords: fairness; taxes; beliefs;

  Citation:

  Di Tella, Rafael, and Juan Dubra. "A Note on Fairness and Redistribution." American Economic Review 103, no. 1 (2013): 549–553.

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• Book | 2012

  How Will You Measure Your Life?

  Clayton M. Christensen, James Allworth and Karen Dillon

  Citation:

  Christensen, Clayton M., James Allworth, and Karen Dillon. How Will You Measure Your Life? HarperBusiness, 2012.

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• Working Paper | 2011

  Free to Punish? The American Dream and the Harsh Treatment of Criminals

  Rafael Di Tella and Juan Dubra

  We describe the evolution of selective aspects of punishment in the U.S. over the period 1980-2004. We note that imprisonment increased around 1980, a period that coincides with the "Reagan revolution" in economic matters. We build an economic model where beliefs about economic opportunities and beliefs about punishment are correlated. We present three pieces of evidence (across countries, within the U.S., and an experimental exercise) that are consistent with the model.

  Keywords: Crime and Corruption; Economy; Moral Sensibility; Mathematical Methods; Opportunities; Behavior; United States;

  Citation:

  Di Tella, Rafael, and Juan Dubra. "Free to Punish? The American Dream and the Harsh Treatment of Criminals." NBER Working Paper Series, No. 17309, August 2011.

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