The Evolution of Ideology, Fairness and Redistribution

Abstract

Ideas about what is "fair" above and beyond the individual's position in the income ladder influence preferences for redistribution. We study the dynamic evolution of different economies in which redistributive policies, perceptions of fairness, inequality and growth are jointly determined. We show how including fairness explains various observed correlations between inequality, redistribution and growth. We also show how different beliefs about fairness can keep two otherwise identical countries in different development paths for a very long time.