Inequality and incentives with societal other-regarding preferences

Benjamin Bental, Jenny Kragl

    Research output: Contribution to journalArticlepeer-review


    The article is concerned with understanding the impact of social preferences and wealth inequality on aggregate economic outcomes. We investigate how different manifestations of societal other-regarding preferences affect labor relationships and incentive contracts at the microeconomic level and how these in turn translate into macroeconomic outcomes. Increasing the workers’ sensitivity to inequality raises effort and reduces wage costs for poor but not necessarily for rich workers. A parameterized version of the model roughly mimicking relevant key features of the industrialized world shows that, at the general equilibrium, increased initial wealth differences raise aggregate profit and output but entail distributional utility losses and increased inequality.

    Original languageEnglish
    Pages (from-to)1298-1324
    Number of pages27
    JournalJournal of Economic Behavior and Organization
    StatePublished - Aug 2021

    Bibliographical note

    Publisher Copyright:
    © 2021 Elsevier B.V.


    • Competitiveness
    • General equilibrium
    • Incentives
    • Income
    • Inequality
    • Inequality aversion
    • Other-regarding preferences
    • Wealth

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Organizational Behavior and Human Resource Management


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