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The Prince and the Pauper: The effect of inherited-wealth status on productivity in the lab

There is limited theory and empirical evidence about the effects of inherited wealth and social comparison on individual labor-market behavior. Investigating the impact of inherited-wealth status – an accident of birth rather than an outcome of competition – contributes to the understanding of the mechanisms underlying intergenerational inequality. This lab experiment analyses whether framed inherited endowments influence real-effort task performance. In particular, the analysis concerns the interaction between a framed inherited status in the lab and participants’ real intergenerational wealth status outside the lab. The results indicate that inheritance-framed endowments trigger a race gap (in favor of non-black participants) but identity-neutral lottery-framed endowments do not. Inheritance framing in the lab appears to trigger significant changes in behavior for Princes (participants that expect to inherit wealth from their parents) while opposite but non-significant effects are found for Paupers (who do not expect to inherit wealth from their parents).

Working paper 748
1 May 2018
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