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How Inequality Affects Altruism

How Inequality Affects AltruismHow Inequality Affects Altruism

A new study found wealthy people in states with skewed income scales were less generous.

That’s the implication of new research that suggests inequality makes wealthy people less generous. The study published on Tuesday in the Proceedings of the National Academy of Sciences is the first to probe how inequality influences altruism.

Some earlier research in the US had observed that the rich are stingier than people with more modest incomes. But studies in Europe and Japan didn’t find the same effect. “That was a bit of a puzzle for us,” says Stéphane Côté, a professor at the University of Toronto’s Rotman School of Management, who wrote the paper with colleagues from Toronto and Stanford.

 “That’s why we reasoned maybe a factor that seems to affect the rich is whether they live in a place that is highly unequal in terms of economic inequality.”

The team used existing data from a nationally representative survey of 1,500 Americans called the Measuring Morality study. That gauged generosity through an approach called the “dictator game” that has been shown to correlate with real-life giving. Participants were told they have 10 raffle tickets and are given an opportunity to transfer some of them to another, anonymous participant, reported bloomberg.com

When they sorted the results by states’ levels of inequality, researchers found that rich people in states with the most skewed income scales were significantly less generous than their peers in states where wealth is more evenly distributed. They looked at the top 15% of the income distribution, or those households making at least $125,000 a year.

 Benefit of Fake Data

To validate the findings, researchers recruited another 700 people online. These participants were shown fake data that portrayed their home states as either having high or low inequality. Given the same opportunity to allocate raffle tickets to other participants, the wealthy who believed they were in highly unequal states were less generous than poorer people. The difference went away when people were told they were living in states with more even income distributions.

What’s behind the findings? The authors say concentrating wealth in the hands of a few may lead to “the belief that one is more important and deserving than others.” That sense of entitlement may make the rich less altruistic and lead them to “believe that resources rightly belong to them.”

The findings are consistent with unpublished research that shows cuts to social welfare programs, such as unemployment insurance, followed increases in inequality at the state level, says Lyle Scruggs, a political scientist at the University of Connecticut. “If the people in charge are even richer, are they less likely to care about those less fortunate, and therefore be less generous, as a mindset?” he asked. In other words, society can’t bet on Uncle Scrooge changing his ways.

Before it’s here, it’s on the Bloomberg Terminal.

 

Financialtribune.com