Inequality and Confidence, In the Lab

Posted: 15 Oct 2009

See all articles by Jeffrey V. Butler

Jeffrey V. Butler

Dept. of Economics, University of California, Merced

Date Written: October 13, 2009

Abstract

Confidence can have important economic consequences. Existing research has largely focused on overconfidence, ignoring systematic variation in confidence. Building on sociological and social psychological research, this paper examines the impact of mere inequality on confidence in an incentive-compatible laboratory setting. Inequality was introduced into an otherwise-standard social learning experiment by randomly dividing participant into high-paying and low-paying groups. Control sessions were conducted without inequality. The results demonstrate that disadvantageous inequality undermines confidence, while being on the comfortable side of inequality increases confidence. Further, participants' perceived connection between own- and own-group performance, coupled with patterns in confidence, created discriminatory beliefs against the low-paid group. The observed inequality-confidence link provides an alternative explanation for self-reinforcing economic inequality independent of external discrimination.

Keywords: Confidence, Experiment, Inequality, Identity, Social Identity, Groups, Discrimination, Beliefs, Status

JEL Classification: D84, J71, Z13, A12, D03

Suggested Citation

Butler, Jeffrey Vincent, Inequality and Confidence, In the Lab (October 13, 2009). Available at SSRN: https://ssrn.com/abstract=1488060

Jeffrey Vincent Butler (Contact Author)

Dept. of Economics, University of California, Merced ( email )

5200 N. Lake Road
Merced, CA 95343
United States

HOME PAGE: http://jeffreyvbutler.org

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