Culture in Preferences for Income Equality and Safety Nets

Abstract

ABSTRACTEconomic and social policies vary across countries, reflecting their cultures and shaping them. People in some countries are more loss averse than in others. People in some countries express stronger preferences for income equality than do people in others, and some countries offer stronger safety nets than others do. The cultural dimension of uncertainty avoidance expresses the degree to which people in a country feel uncomfortable with uncertainty and the way a country deals with the fact that the future can never be known. The author finds that uncertainty avoidance is associated with loss aversion. People are more loss averse in the domains of both portfolios and jobs in countries where uncertainty avoidance is high. Moreover, people in countries where uncertainty avoidance is high express stronger preferences for income equality, and social spending in such countries is high. The cultural dimension of power distance expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally. The author finds that people in countries where power distance is high express weaker preference for income equality, and social spending in such countries is low.