Scandinavian Working Papers in Economics
Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics
No 19/2015: Equity theory and fair inequality: a neuroeconomic study.
Alexander W. Cappelen (), Tom Eichele (), Kenneth Hugdahl (), Karsten Specht (), Erik Ø. Sørensen () and Bertil Tungodden ()
Additional contact information
Alexander W. Cappelen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Tom Eichele: University of Bergen, Postal: Department of Biological and Medical Psychology, University of Bergen, Norway
Kenneth Hugdahl: University of Bergen, Postal: Department of Biological and Medical Psychology University of Bergen , Norway
Karsten Specht: University of Bergen, Postal: Department of Biological and Medical Psychology University of Bergen , Norway
Erik Ø. Sørensen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Bertil Tungodden: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Abstract: The present paper reports results from the first study designed to examine the neuronal responses to income inequality in situations in which individuals have made different contributions in terms of work effort. We conducted an experiment that included a prescanning phase in which the participants earned money by working, and a neuronal scanning phase in which we examined how the brain responded when the participants evaluated different distributions of their earnings. We provide causal evidence of the relative contribution of work effort being crucial for understanding the hemodynamic response in the brain. We found a significant hemodynamic response in the striatum to deviations from the distribution of income that was proportional to work effort, but found no effect of deviations from the equal distribution of income. We also observed a striking correlation between the hemodynamic response in the striatum and the self-reported evaluation of the income distributions. Our results provide the first set of neuronal evidence for equity theory and suggest that people distinguish between fair and unfair inequalities.
Keywords: Fairness; inequality; striatum; equity theory
JEL-codes: D63
29 pages, August 24, 2015
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