Rotman School of Management, University of Toronto

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Generosity of the Wealthy Depends on the Level of Economic Inequality of Where They Live Says New Study.

April 18, 2016

Toronto – They take more candy from kids, are bigger cheats behind the wheel and feel less compassion for cancer patients.

But the latest research into the alleged selfishness of the rich shows that this is not always the case – their generosity depends on how much economic inequality there is where they live.

Rich people living in places where there are only modest gaps between the highest and lowest incomes are just as giving, if not more, than anyone else. Those living in areas with high income inequality are stingier, says the study from the University of Toronto's Rotman School of Management.

"Many studies in the past have found that the wealthy are less generous, but a few studies have found either the opposite or that it makes no difference," said Stéphane Côté, a professor of organizational behaviour and human resource management at the Rotman School. "We thought a multi-level approach might explain what's going on."

Prof. Côté, along with Rotman PhD student Julian House and Robb Willer of Stanford University, combined data from a U.S. survey of Americans’ morality with a separate measurement of inequality in different jurisdictions, called the Gini index.

The researchers found higher-income participants were more giving in the survey’s test of their generosity if they lived in areas with lower levels of inequality. However those coming from high inequality areas were 20% less generous – they donated fewer of their raffle tickets to another, anonymous participant who did not have any.

The researchers ran a similar test in their own separate experiment to check for other possible factors affecting the results. They found no link between levels of generosity and income when participants were told they lived in places with narrower gaps between rich and poor. A negative link between income and generosity only showed up when participants were told income disparities were higher.

A sense of entitlement or a fear of losing higher status may explain the difference in conditions of high income inequality, the researchers speculate. When there are smaller gaps in income, higher earners may not see themselves as so different from others and don't have as far to fall economically by giving.

The results should be a caution to anyone setting policies affecting income equality, said Prof. Côté.

“There have been books written about why high inequality is okay because, they say, it’s a self-corrective mechanism. Those who get the most redistribute it,” he said. “But we’re finding no, they are not.”

The paper was published in the Proceedings of the National Academy of Sciences.

For the latest thinking on business, management and economics from the Rotman School of Management, visit www.rotman.utoronto.ca/FacultyAndResearch/NewThinking.aspx.

The Rotman School of Management is located in the heart of Canada’s commercial and cultural capital and is part of the University of Toronto, one of the world’s top 20 research universities. The Rotman School fosters a new way to think that enables our graduates to tackle today’s global business challenges.  For more information, visit www.rotman.utoronto.ca.

The Rotman School of Management is located in the heart of Canada’s commercial and cultural capital and is part of the University of Toronto, one of the world’s top 20 research universities. The Rotman School fosters a new way to think that enables our graduates to tackle today’s global business and societal challenges.  For more information, visit www.rotman.utoronto.ca.

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