Behavioral economics | Intergenerational equity | Empirical methods
Behavioral economics
One particular group of research papers relates to experiments that put to a test the common behavioural assumptions in economics. One prominent example of such a contribution is the article "Fairness and the Development of Inequality Acceptance" published in Science by Ingvild Almås, Alexander Cappelen, Erik Sørensen, and Bertil Tungodden in 2010. Fairness considerations fundamentally affect human behavior, but the understanding of the nature and development of people’s fairness preferences is limited. In real life, people often disagree on what is fair because they disagree on whether individual achievements, luck, and efficiency considerations of what maximizes total benefits can justify inequalities. The authors used an experiment with a modified “dictator game” to capture these features. They were able to study how inequality acceptance develops in adolescence. They found that as children enter adolescence, they increasingly view inequalities reflecting differences in individual achievements, but not luck, as fair, whereas efficiency considerations mainly play a role in late adolescence.
Intergenerational equity
Many theoretical developments relevant for ESOP have been carried out by Geir Asheim. In one work he explores the concept of "intergenerational equity". He critically reviews axiomatic analyses of preferences over infinite streams and evaluates different kinds of intergenerational social preferences by comparing their axiomatic basis as well as their performance in simple present-future conflicts. He illustrates his analysis using real-world intergenerational conflicts, such as global warming, as a backdrop. In another work he discusses the question of how to do “global welfare comparisons” in order to provide a normative foundation for transfers between different economies.
Empirical methods
One methodological development relevant for many of ESOP’s empirical discussions has been done by Jo Thori Lind and Halvor Mehlum. They have devised a statistical test to assess whether there is a nonlinear U-shape or hump shape present in the data. This test is relevant for many of ESOP’s questions, as many of the empirical patterns exhibit noncontinuous patterns. A case in point is the question of whether or not there is a trade off between income inequality and income levels.