Unearned Inequality and Biased Distributional Preferences: Evidence from a Lab Experiment in Ghana

I use a dictator game, with a preceding production phase, to explore how different sources of unearned inequality influence distribution decisions. The experiment introduces three inequalities: (1) inequality due to investment success, (2) inequality of initial endowments, and (3) inequality in a real-effort task requirement for receiving the initial endowment. I find that participants in rural Ghana respect each inequality, adjusting their allocation decisions in response to investment success, the distribution of initial endowments, and the effort requirement. Their distributional preferences suggest an interaction between the sources where those with high initial endowments are more likely to respect project success outcomes. Moreover, participants demonstrate a self-serving bias in fairness preferences, where those with high initial endowments and successful projects are more likely to respect inequality. Finally, I find a significant increase in self-allocations when participants must exert effort to receive their endowment.