Overconfidence Lowers Men's Appetite to Redistribute Wealth

By Joël van der Weele

Surveys consistently show that women are more in favor of redistribution in many Western countries, even after controlling for social and economic factors. Consistent with this, women vote more for left-wing parties than men. For instance, the gender gap in U.S. elections has been growing for decades, with a record-high 24 points in 2016, and new records being set in current polling.

In novel experimental research, an international research team including myself investigated how such attitudes towards redistribution originate in different views of fairness, a willingness to share with others, and the perceptions of one’s own relative income and it’s volatility. Our results show that men's inflated confidence concerning their income is the main reason for their reluctance to redistribute.

To reach this conclusion, we analyzed data from experiments from eight locations in 4 different countries, the U.S., Italy, Germany, and Norway. In the experiments, participants were put together in groups of about 20 people, and given a highly skewed distribution of monetary rewards, ranging from a few cents for some participants to 100 dollars for others. Before taking home these rewards, participants could choose how much of them to redistribute among the group, giving them the possibility of implementing a more egalitarian outcome.

Participants had to decide whether to redistribute money in their group, with uncertainty about their future income.

Source: By OpenClipart on Freesvg Images

Across different conditions, the experiment varied several aspects of the redistribution decision: sometimes the initial allocation of resources was random, while other times it was based on a form of merit (i.e. performance on a task); sometimes the redistribution decision involved the decision-makers own money and other times it only applied to the rest of the group. Finally, in some conditions there was uncertainty about the initial income distribution, implementing a “veil of ignorance” – a device promoted by the philosopher John Rawls to tease out fairness concerns when one’s own interests are unclear.

While we find a clear overall gender gap in the tendency to redistribute, but this gap is not universal across conditions and geographical locations. The gap is largest when initial income is based on merit, and when there is uncertainty about the level of the individual incomes (i.e. under the veil of ignorance). Digging deeper, we find that gender gaps in overconfidence can explain most of these results. Whereas men are mostly confident, and often overconfident, about their relative task performance and hence their relative standing in the income distribution, women are much less so.

Women believe that they stand to gain more from redistribution than they really do. Across all eight experimental locations, we found that overconfidence explained much of the gender gap in redistribution. We also find an explanatory role, albeit a smaller one, for risk aversion: women are more worried about the variance in their incomes and use redistribution to reduce this variance.

Thus, our results suggest that women are more likely to redistribute than men because they are more pessimistic and worried about their future incomes. The results from the laboratory match with other evidence, showing that men are (unjustifiably) more optimistic about their labor market prospects, and that misperceptions about relative income levels affect support for redistribution. Our study suggests that increased income risk for women, stemming from rising divorce rates, decreasing rates of early marriage, and increased labor market participation may be an important driver of the gender gap in redistribution. As male overconfidence seems to be a reliable feature of human life, gender gaps in redistributive attitudes are likely here to stay.