"The Prince and the Pauper" : The effect of inherited-wealth status on productivity in the lab

There is limited theory and empirical evidence about the effects of inherited wealth and social comparison on individual labour-market behavior. Investigating the impact of inherited-wealth status - an accident of birth rather than an outcome of competition - contributes to the understanding of the mechanisms underlying intergenerational inequality. This lab experiment analyses whether framed inherited endowments infuence real-effort task performance. In particular, the analysis concerns the interaction between a framed inherited status in the lab and participants 'real inter-generational wealth status outside the lab. The results indicate that inheritance-framed endowments trigger a race gap (in favor of non-black participants) but identity-neutral lottery-framed endowments do not. In-heritance framing in the lab appears to trigger signicant changes in behavior for Princes (participants that expect to inherit wealth from their parents) while opposite but non-signicant effects are found for Paupers (who do not expect to inherit wealth from their parents).