Market luck: Skill-biased inequality and redistributive preferences

Market forces beyond individual control are a central driver of income inequality, a phenomenon we refer to as market luck. In meritocratic societies, this raises the question of whether individuals perceive such inequalities as fair. To address this question, we conduct experiments in the US, France, and China in which inequality between workers emerges due to random matching with buyers who require specific skills, creating inequality driven by market luck. Our findings from the US indicate that individuals are more accepting of inequalities resulting from market luck than those caused by brute luck, even though both are beyond workers' control and unrelated to their effort. The results are directionally consistent across all three countries, though with varying magnitudes of treatment effects, suggesting that redistributive preferences are sensitive to cultural differences and exposure to market institutions. We further validate our findings in survey experiments using more natural contexts and show that behavior in the experiments predicts support for real-world policies. Our results provide a novel explanation for the muted demand for redistribution amid rising inequality.