Abstract
This paper is an empirical study of what motivates net contributors to support redistributive policies. While studies in the area have tended to consider broad measures of inequality and support for redistribution in general, we focus on a single, salient relationship between local unemployment rates and demand for spending on unemployment benefits. Using a particularity of the Spanish labour market, we estimate how workers’ stated preferences for unemployment benefits spending respond to changes in the local unemployment rate. We then decompose this response into the part explained by risk aversion, and thus demand for insurance, and the part explained by inequity aversion. Our results suggest that increases in local unemployment rates lead to increased demand by workers for unemployment benefits spending. Moreover, our results are consistent with an insurance motive driving this relationship but provide little support for inequity aversion. Our results suggest that studies of the relationship between inequality and demand for redistribution might benefit from considering both the source and measure of the inequality and the instrument of redistribution.
Highlights
One of the main roles of modern governments is the redistribution of income
Employment numbers were obtained from the Instituto Nacional de Estadística (INE). We have considered an alternative approach to identifying the funcionarios by assuming that funcionarios are over 30 years of age, working in the public sector administration and working in one of four occupations which we assumed to be most likely assigned funcionario status
In column (1), we present the results obtained from estimating the model for all workers while interacting all the regressors with a dummy equal to 1 if i is employed in the public sector in period t
Summary
One of the main roles of modern governments is the redistribution of income. There is a growing literature in economics which seeks to understand just why it is that net contributors to a redistributive system support it (Boeri et al 2001). Economists have identified a number of potential motivations underlying support for redistribution like demand for insurance and inequity aversion, and Alesina and Giuliano (2011) note that the empirical disentanglement of these motives is difficult, albeit not ‘fatally’ so We address this challenge directly and seek to contribute to the empirical work on redistributive preferences Our results tell us something about the relationship between unemployment and demand for redistribution via unemployment benefits but may tell us little about how demand for redistribution via some other instrument will respond to changes in the income distribution. General survey questions about the role of government in the redistribution of income may neglect heterogeneity of the preferences over the source of inequality and the instrument of redistribution and may fail to measure the relationship of interest.
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