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Microenterprises constitute an important source of employment, and developing such enterprises is a key policy concern in most countries. But what is the most efficient tool for microenterprise development? We study this question in a developing country context (Tanzania), where microenterprises are the source of employment for more than half of the labor force, and we report from a field experiment that jointly investigated the importance of a human capital intervention (business training) and a financial capital intervention (business grant). Using data from three survey rounds, a lab experiment, and administrative records of the microfinance institution, we present evidence on business performance, management practices, happiness, business knowledge, and noncognitive abilities. Our study demonstrates strong effects of the combination of the two interventions on male entrepreneurs, while the effects on female entrepreneurs are much more muted. The results suggest that long-term finance is an important constraint for microfinance entrepreneurs, but that business training is essential to transform financial capital into productive investments. Our study also points to the need for more comprehensive measures to promote the businesses of female entrepreneurs. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1933 . This paper was accepted by John List, behavioral economics .

We report from a large-scale randomized field experiment conducted on a unique sample of more than 15,000 taxpayers in Norway who were likely to have misreported their foreign income. By randomly manipulating a letter from the tax authorities, we cleanly identify that moral suasion and the perceived detection probability play a crucial role in shaping taxpayer behavior. The moral letter mainly works on the intensive margin, while the detection letter has a strong effect on the extensive margin. We further show that only the detection letter has long-term effects on tax compliance. This paper was accepted by Yan Chen, behavioral economics.

Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risk-taking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators.

Fairness considerations fundamentally affect human behavior, but our understanding of the nature and development of people's fairness preferences is limited. The dictator game has been the standard experimental design for studying fairness preferences, but it only captures a situation where there is broad agreement that fairness requires equality. 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. We modified the dictator game to capture these features and studied how inequality acceptance develops in adolescence. We 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.

A core question in the contemporary debate on distributive justice is how to understand fairness in situations involving production. Important theories of distributive justice, such as strict egalitarianism, liberal egalitarianism, and libertarianism, provide diferent answers to this question. This paper presents the results from a dictator game where the distribution phase is preceded by a production phase. Each player's contribution is a result of a freely chosen investment level and an exogenously given rate of return. We estimate simultaneously the prevalence of three principles of distributive justice among the players and the distribution of the weight they attach to fairness.

In this paper we provide new evidence showing that fair behavior is intuitive to most people. We find a strong association between a short response time and fair behavior in the dictator game. This association is robust to controls that take account of the fact that response time might be affected by the decision-maker’s cognitive ability and swiftness. The experiment was conducted with a large and heterogeneous sample recruited from the general population in Denmark. We find a striking similarity in the association between response time and fair behavior across groups in the society, which suggests that the predisposition to act fairly is a general human trait.

We report from a lab experiment conducted with a sample of participants that is nationally representative for the adult population in Norway and two student samples (economics students and non-economics students). The participants make choices both in a dictator game (a non-strategic environment) and in a generalized trust game (a strategic environment). We find that the representative sample differs fundamentally from the student samples, both in the relative importance assigned to different moral motives (efficiency, equity, and reciprocity) and in the level of selfish behavior. It is also interesting to note that the gender effects observed in the student samples do not correspond to the gender effects observed in representative sample. Finally, whereas economics students behave less pro-socially than non-economics students, the two student groups are similar in the relative importance they assign to different moral motives.

To understand attitudes to inequality, we need to study people’s fairness preferences and beliefs about the sources of inequality. This article reviews the existing experimental literature on fairness, including our new study ‘Fairness Across the World’ that collected novel data on attitudes to inequality in 60 countries. We establish that people in general are more willing to accept inequalities that reflect differences in performance than inequalities that reflect differences in luck—and that people care more about fairness than efficiency. We also document that people differ in their fairness preferences both within and between countries. Richer countries are more meritocratic, and, correspondingly, richer people are more meritocratic within countries. People also differ in their beliefs about the sources of inequality both between and within countries, and the evidence is consistent with people having a self-serving bias in beliefs.

The present paper reports results from, to our knowledge, the first study designed to examine the neuronal responses to income inequality in situations in which individuals have made different contributions in terms of work effort. We conducted an experiment that included a prescanning phase in which the participants earned money by working, and a neuronal scanning phase in which we examined how the brain responded when the participants evaluated different distributions of their earnings. We provide causal evidence for the relative contribution of work effort being crucial for understanding the hemodynamic response in the brain to inequality. We found a significant hemodynamic response in the striatum to deviations from the distribution of income that was proportional to work effort, but found no effect of deviations from the equal distribution of income. We also observed a striking correlation between the hemodynamic response in the striatum and the self-reported evaluation of the income distributions. Our results provide, to our knowledge, the first set of neuronal evidence for equity theory and suggest that people distinguish between fair and unfair inequalities. Significance People’s preferences for income distribution fundamentally affect their behavior and contribute to shaping important social and political institutions. The study of such preferences has become a major topic in behavioral research in social psychology and economics. Despite the large literature studying preferences for income distribution, there is no direct neuronal evidence of how the brain responds to income distributions when people have made different contributions in terms of work effort. The present paper reports from, to our knowledge, the first neuroimaging study designed to examine how the brain responds to the distribution of income in such situations. As such, to our knowledge it is also the first study to examine the neuronal basis for equity theory.

Can a tiny gain to sufficiently many well-off justify imposing a much larger sacrifice on the worst-off? We show that if one answers negatively to such a question and endorses replication invariance, one is forced to accept the maximin principle and give full priority to the worst-off even when a tiny gain to the worst-off imposes a substantial sacrifice on arbitrarily many well-off. If one dislikes this consequence, one faces a real dilemma in choosing between the tyranny of aggregation and the tyranny of non-aggregation.