Does income inequality make rich people less generous?

They won’t give it away on their own.
They won’t give it away on their own.
Image: AP Photo/Jacquelyn Martin
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Wealthy people from states in the US with relatively higher levels of income inequality appear to be less generous than their peers from states with more equal income distributions, according to a new study in the Proceedings of the National Academy of Sciences.

Researchers from Stanford University and the University of Toronto’s Rotman School of Management looked first at the results of an existing study of 1500 Americans playing an exercise known as the “dictator game.”

Participants were given a set of raffle tickets and told to share them with others. When participants were sorted by state and income, wealthier people from places with higher income inequality appeared to have been less generous.

In a follow-up study, the researchers gave participants false data on income inequality in their state and asked them to divvy up tickets again. Again, wealthy participants from states they believed were less equal gave less than peers from more equal states.

Researchers hypothesized that an unequal environment “can foster a sense of entitlement among higher-income individuals that, in turn, reduces their generosity.”

If this is the case, distribution of services shouldn’t be driven by altruism alone, Kim Weeden, director of Cornell University’s Center for the Study of Inequality, told Bloomberg.

Fortunately, there is some hope that those with the most to give aren’t total misers.

Among households who give to charity, generosity in relation to income often follows a U-shaped curve: people with the lowest and highest incomes give higher percentages to charity than those in the middle of the scale.

And the simulated environment of a research lab doesn’t always capture human behavior accurately.

“Telling people that their state has relatively high or low inequality doesn’t actually tell you whether people behave differently in those places,” said Jonathan Meer, an associate professor of economics at Texas A&M University. “It tells you how people respond to being told a falsehood about inequality.”

There is another factor not accounted for in the study, Meer pointed out: States with higher levels of inequality also tend to spend more on services, which has the documented effect of crowding out private charitable giving.

“I’m speculating too, of course,” Meer said, “but my proposed mechanism has less appeal to those who like the narrative that high-income people are jerks.”