Testing the Compensatory Theory: A Survey Experiment on COVID-19 and Redistributive Preferences in the UK

Original

Testing the Compensatory Theory: A Survey Experiment on COVID-19 and Redistributive Preferences in the UK

Mariana Alvarado, Pablo Querubin, Kenneth Scheve, David Stasavage

Abstract

The COVID-19 pandemic motivated a lot of research to study whether the pandemic altered redistributive preferences. Less effort has gone into testing theories that might explain how and why the pandemic could affect these preferences. We conducted an online information provision survey experiment in the United Kingdom to test the compensatory theory of progressive taxation—which maintains that higher taxes on the rich may be justified as a way of compensating for other benefits unequally granted by the state—in the context of the pandemic. Our findings show that priming respondents to think about the role played by the state in the pandemic’s unequal impact increases their support for taxing the rich over and beyond the effect of simply highlighting this unequal impact. We provide evidence consistent with perceived fairness as the main mechanism driving these results. These findings support the claim that the compensatory theory is a key driver of individual preferences for taxation.