The United States stands as the most unequal country in the OECD, despite most Americans expressing a preference for more equal wealth distribution. This presents a puzzle: if most citizens want greater equality, why does inequality persist and even grow?
Theories from political science offer one compelling explanation. While the average voter might prefer more redistribution of wealth, those who exert disproportionate influence on policy—business and economic elites—may hold dramatically different views.
For this explanation to hold water, economic elites would need to be more tolerant of inequalities than typical citizens. However, researching the preferences of economic elites has proven challenging, as they are often difficult to reach using standard surveys. In a new IZA discussion paper, Marcel Preuss, Germán Reyes, Jason Somerville, and Joy Wu address this gap by studying the redistributive preferences of tomorrow’s economic leaders—MBA students from an elite Ivy League program.
Finding 1: Future business leaders accept greater inequality
Using an experimental design where impartial spectators (MBA students) choose how to allocate earnings between pairs of workers, the researchers found that MBA students implement substantially more unequal distributions than the average American.
When worker earnings were randomly assigned, MBA students implemented distributions with a Gini coefficient (a common measure of inequality where 0 represents perfect equality and 1 represents maximum inequality) of 0.43, which is notably higher than the 0.36 Gini observed in previous work using representative US samples.
To put this magnitude in perspective, the gap between MBA students and average Americans represents about 35% of the inequality gap between Americans and Scandinavians in analogous experiments.
Finding 2: Future elites are highly responsive to efficiency costs
The most dramatic difference between future business leaders and the general population emerged in their sensitivity to efficiency costs. When redistribution comes with efficiency costs—meaning the total available income decreases when earnings are redistributed—MBA students sharply reduce their redistribution efforts.
Introducing even modest efficiency costs increased the Gini coefficient they implemented by 0.20 points. This responsiveness is an order of magnitude larger than what researchers observe in studies of average Americans, who typically show an elasticity close to zero—meaning they continue to redistribute even when it reduces the total economic pie.
This suggests a fundamental difference in values: while the average American prioritizes fairness concerns over efficiency when considering redistribution, future business leaders place much higher weight on maximizing the total economic output, even if it means accepting greater inequality.
Why this matters
These findings illuminate why the United States maintains high levels of inequality despite most citizens expressing preferences for more equal distributions. The individuals who disproportionately influence policy—current and future economic elites—implement more unequal earnings distributions than the average American and place much greater weight on efficiency considerations.
This research has important implications for understanding policy debates around taxation, social programs, and economic inequality. If those with the most influence over economic policy consistently prioritize efficiency over equality, it becomes clearer why policies aimed at reducing inequality face significant hurdles, even when they have popular support.
As wealth concentration continues to increase in many developed economies, understanding these divergent preferences becomes crucial for addressing one of today’s most pressing economic challenges: how to create broadly shared prosperity in a system where decision-makers may fundamentally value different outcomes than the majority of citizens.