An Equity Theory of Predistribution

Abstract Research on attitudes towards inequality suggests the possibility of a causal relationship whereby attitudes to inequality affect inequality levels and where levels of inequality affect attitudes to inequality. This paper extends research on epistemic beliefs and macro-level inequality with an empirical analysis of micro-level “Equity Beliefs” defined as value judgements as to the fairness of market outcomes, within the context of “predistribution” that Jacob Hacker defined as “the way in which the market distributes its rewards in the first place” (2011, p. 35). An Equity Theory of Predistribution is posited and its predictions are investigated that, i. Equity Beliefs emerge from experiences of income inequality, ii. Equity Beliefs exert a predistributive effect on inequality, and iii) Equity Beliefs moderate disposable income inequality. Separate models are specified to test these propositions empirically at the country level, using data from the European Union spanning the period 1984 to 2018. The results support each of the propositions. Additionally, this study finds that Equity Beliefs exacerbate disposable income inequality via its interaction with corporate employment policy. This research highlights the role of micro-level beliefs as an antecedent of resource allocations that shape macro-level inequality, and it informs government and corporate-level actors seeking to reduce inequality within and among countries, that progress on UN SDG no. 10 is contingent upon addressing societal notions of equity. In line with this conclusion, the study advocates for development of “equity targets” for employment income that could potentially be operationalized through their integration into a future ISO Equality Certification framework.