Demand For Redistribution Research Articles

Demand for redistribution in the wake of the Great Recession

Data from the European Social Survey suggest that while average demand for redistribution in Europe has increased in the wake of the Great Recession, the change differs significantly across income groups. A twofold hypothesis is advanced to account for this phenomenon: (1) The severity of the crisis has led to a new awareness of economic risks among middle and higher income groups, which have traditionally been far less exposed to material risks; (2) the change in risk perceptions has led to a higher support for redistribution through the social insurance motive. Empirical evidence supports this hypothesis and shows effects to be strongest for the self-employed, older workers and those living in countries most affected by the crisis.

Preferences for redistribution after the economic crisis

This paper analyses the effects of the recent Economic Crisis on individual preferences for redistribution in 23 European countries. After implementing a decomposition of the variation in these preferences, it is showed that the crisis was highly significant in increasing support for redistribution. It is found that more unemployment and, in particular, youth unemployment has considerably raised the citizens’ demand for redistribution.

Economic inequality and public demand for redistribution: combining cross-sectional and longitudinal evidence

Economic inequality and public demand for redistribution: combining cross-sectional and longitudinal evidence

The effect of job insecurity and employability on preferences for redistribution in Western Europe

This article sheds light on the so far under-researched effect of subjective job insecurity on social policy preferences and the moderating role of employability. Using pooled individual-level data from the European Social Survey for workers from 11 Western European countries, it shows that subjective job insecurity does increase demand for redistribution. This effect is conditional upon employability perceptions, that is, expectations about future employment prospects. The impact of job insecurity on redistribution is strongest for workers who fear long-term unemployment. The findings do not seem to be driven by underlying political belief systems as they are robust in a reduced sample of centrist non-partisan workers. While the results confirm the hypothesised repercussions of labour-market flexibility on the individual level, aggregate effects should not be exaggerated, since the segment of workers exposed to job insecurity and low employability at the same time is rather small.

PREFERENCES FOR REDISTRIBUTION AND PERCEPTION OF FAIRNESS: AN EXPERIMENTAL STUDY

We conduct a laboratory experiment to study how demand for redistribution of income depends on self-interest, insurance motives, and social concerns relating to inequality and efficiency. Our choice environments feature large groups of subjects and real-world framing, and differ with respect to the source of inequality (earned or arbitrary), the cost of taxation to the decision maker, the dead-weight loss of taxation, uncertainty about own pretax income, and whether the decision maker is affected by redistribution. We estimate utility weights for the different sources of demand for redistribution, with the potential to inform modeling in macroeconomics and political economy.

Social mobility and the demand for income redistribution in Latin America

Alesina and Angeletos (2005) and Alesina and Glaeser (2004) argue that income redistribution preferences vary systematically between the different regions and influence the size of government and the composition of public spending. This article analyses the demand for redistribution in Latin America, paying particular attention to the effects of mobility expectations on this demand. The findings suggest that demand for redistribution is driven primarily by self-interest and by considerations of fairness based on the inequality of opportunities. They also reveal the importance of past mobility, while the prospect of upward mobility (POUM) hypothesis advanced by Benabou and Ok (2001) is rejected in the case of the Latin America region.

Evolution over time of the determinants of preferences for redistribution and the support for the welfare state

The objective of this article is to analyse the determinants of preferences for redistribution in Spain both at an aggregate and regional level. Using country level data, we put to the test the Alesina and Angeletos’ (2005) hypothesis, the strong and positive relationship between the ‘belief that luck determines income’ and the support for redistributive policies. As an innovative contribution, we contrast this hypothesis using a set of panel data models with regional and time fixed effects. Our main finding is the existence of a structural change in preferences formation for redistribution in Spain between 1995 and 2007. Furthermore, the empirical results provide some evidence suggesting that (1) the belief that society is unfair have a moderate effect on the individuals’ preferences for redistribution and (2) regional beliefs in Spanish regions are not equally important when determining demand for redistribution.

Unequal opportunities and distributive justice

We provide experimental evidence on how unequal access to performance enhancing education affects demand for redistribution. People earn money in a real effort experiment and can then decide how to distribute it among themselves and another subjects. We compare situations in which randomly chosen people get access to performance enhancing education with situations in which either only luck or only performance determines outcome. We find that unequal opportunities evoke a preference for redistribution that is comparable to the situation when luck alone determines the allocation. However, people with unequal access to education are more likely to disagree about the appropriate distribution.

Immigration, redistribution, and universal suffrage

The effect of immigration on redistribution has been widely debated. This paper contributes to this debate by testing two explanations, which are that (i) immigration tends to reduce redistribution due to people’s higher levels of xenophobia, and that (ii) immigration affects redistribution because immigrants do not have the right to vote. Since the demand for redistribution depends on the (expected) gap between median voter income and mean income, immigrants affect the demand for redistribution because, as non-citizens, they do not change the median voter’s income, but, as economic stakeholders, they do affect the mean income. Four empirical consequences of (i) and (ii) are tested at the individual level. Evidence from the European Values Survey in 45 countries confirms (ii), showing that immigrants’ expected competitiveness on the labor market affects preferences for redistribution and that it is amplified when the perceived number of immigrants is high. In contrast, (i) is globally rejected since the impact of the citizens’ declared level of solidarity with immigrants tends to be weak and depends on the type of measurement or specification used.

Labour market risks and political preferences: The case of temporary employment

AbstractThe political economy literature has gathered compelling evidence that labour market risks shape political preferences. Accordingly, insecurity fuels support for redistribution and left parties. This article analyses this argument for temporary workers, a so far neglected risk category which has increased dramatically in the past two decades. Temporary workers also have been in the focus of recent insider‐outsider debates. Some authors in this line of research have argued that temporary work leads to political disenchantment – for example, non‐instrumental responses such as vote abstention or protest voting. This contradicts risk‐based explanations of political preferences. The article discusses both theoretical perspectives and derives conflicting hypotheses for the empirical analysis of temporary workers' policy and party preferences. The review reveals considerable ambiguity regarding the questions which parties temporary workers can be expected to support and what the underlying motives for party choice are. Synthesising arguments from both perspectives, the article proposes an alternative argument according to which temporary workers are expected to support the ‘new’ left – that is, green and other left‐libertarian parties. It is argued that this party family combines redistributive policies with outsider‐friendly policy design. Using individual‐level data from the European Social Survey for 15 European countries, the article supports this argument by showing that temporary, compared to permanent, workers exhibit higher demand for redistribution and stronger support for the new left. Neither the risk‐based nor the insider‐outsider explanations receive full support. In particular, no signs of political disenchantment of temporary workers can be found. Thus, the findings challenge central claims of the insider‐outsider literature.

The effect of macroeconomic and social conditions on the demand for redistribution: A pseudo panel approach

This paper analyses the effect of macroeconomic and social conditions on the demand for redistribution. Using a synthetic cohort design to generate panel data at the level of socio-demographic groups, analysis of fives waves of data from the European Social Survey (2002–2010) shows that differences across countries in macroeconomic and social conditions have an effect on the demand for redistribution. Consistent with theoretical expectations, economic growth generates a lower demand for redistribution, while higher income inequality generates a higher demand. By contrast, differences across countries in unemployment levels and social expenditure are unrelated to the demand for redistribution. The analysis also suggests that empirical results depend to a considerable extent on the assumptions underlying different methodological approaches.

Altruism and participation costs in local redistribution

PurposeThe purpose of this paper is to investigate the role played by the geographic distance between the poor and non‐poor in the local demand for income redistribution and, in particular, to provide an empirical test of the geographically limited altruism model proposed by Pauly, incorporating the possibility of participation costs associated with the provision of transfers.Design/methodology/approachFirst, the authors motivate the discussion by allowing for an “iceberg cost” as participation for the poor individuals in Pauly's original model. Next, using data from the 2000 Brazilian Census and a panel based on the National Household Sample Survey (PNAD) from 2001 to 2007, the authors estimate the effect of the proximity between poor and non‐poor on the demand for redistribution.FindingsAll of the authors' distance‐related explanatory variables indicate that an increased proximity between poor and non‐poor is associated with better targeting of the programs (demand for redistribution). For instance, a one‐hour increase in the time spent commuting by the poor reduces the targeting by 3.158 percentage points. This result is similar to that of Ashworth et al., but is definitely not due to the program leakages. To empirically disentangle participation costs and spatially restricted altruism effects, an additional test is conducted using unique panel data based on the 2004 and 2006 PNAD, which assess the number of benefits and the average benefit value received by beneficiaries. The estimates suggest that both cost and altruism play important roles in the demand for redistribution and might reduce targeting in Brazil. Lastly, the results indicate that “size matters”; i.e. the budget for redistribution has a positive impact on targeting.Practical implicationsOur results suggest that a totally centralized supply of transfers may be more inefficient than local redistribution in terms of targeting, either due to higher participation costs or because of the eventual greater geographical distance between the national median voter and poor individuals. However, a partial role for the federal government, such as providing funds for redistribution, seems to improve targeting.Originality/valueIn particular, the paper provides an empirical test for the geographically limited altruism model proposed by Pauly, incorporating the possibility of participation costs associated with the provision of transfers. The authors motivate this discussion by adding the possibility of distance‐related “iceberg costs” of delivering benefits to poor individuals and show that these two effects of distance may act to lower the demand for transfers, making it difficult to distinguish between the two effects. These two effects of distance act by lowering the demand for transfers, making it difficult to disentangle the effect of altruism from the effect of cost. The authors' empirical strategy seems to allow to identify each of them and to provide a suggestion on whether it is advantageous to carry out redistribution at the local level.

Meltzer-Richard and Social Mobility Hypothesis: Revisiting the Income-Redistribution Nexus Using German Choice Data

Whereas the supply of redistribution is relatively easy to measure, the determinants of the demand for redistribution are controversially discussed in international literature. Economic theory typically models redistribution as the result of a voting mechanism; this is only inadequately reflected by the existing empirical studies. In general, these studies use survey data and are therefore not able to predict individuals’ decision making under the restriction of a budget constraint. This study aims at eliciting preferences for redistribution in Germany with the help of a Discrete Choice Experiment (DCE), based on a representative sample of 1,538 individuals. A DCE solves the aforementioned problems by forcing individuals to overcome trade-offs. The results show a strong preference for redistribution that overshoots the current level. Considering socio-demographic characteristics, the results contradict the Meltzer-Richard-Model and the POUM hypothesis, while Piketty’s learning model is strongly supported by the data.

Perception of Deception: The Fall in Redistribution Preferences and Rise in Government Mistrust after the Great Recession

Using the first release of the three-wave, four-year General Social Survey panel dataset, we track changes in attitudes towards redistribution and government from 2006 to 2010 to find that decreases in demand for redistribution are associated with decreases in confidence in government after the Great Recession. We use latent class analysis to systematically account for heterogeneity in preferences and uncover four to five distinct preference groups. A variety of personal characteristics predict group membership, yet movement between and within groups is associated with changes in confidence in government. Our findings indicate that political party identification is an important channel through which confidence in government shapes preferences for redistribution. This paper contributes to a growing body of literature that suggests an association between government trust and demand for redistribution. We view our results as suggestive, yet we do perform a series of falsification tests that show the decrease in confidence in government across this time period is not associated with a general desire for smaller government.

Democracy, populism and hyperinflation: some evidence from Latin America

In this paper we test for the populist view of inflation in South America during the eventful period between 1970 and 2007, a period which captures the latest democratic transition in the continent, episodes of hyperinflation and finally macroeconomic stabilisation. The results—based on panel time-series data and analysis—confirm the prediction which suggests that recently elected governments coming into power after periods of political dictatorship, and which are faced with demand for redistribution, end up engaging in populist (or redistributive) policies, which tend to lead to high inflation and overall poor macroeconomic performance. All in all, we suggest that the implementation of democracy as such requires not only the “right political context”—or an appropriately constrained executive—to work well, but it also must come with certain economic institutions (central bank independence and a credible and responsible fiscal authority), institutions that were (coincidentally) absent in South America right after re-democratisation, but which would presumably raise the costs of pursuing populist policies in the first place.

‘Plus ça change, plus c’est la même chose’: The evolution and the structure of attitudes toward economic liberalism in France between 1990 and 2008

Many findings have documented the movements of aggregate public opinion on economic liberalism over time. By combining a series of EVS items, we point out that the French grew more skeptical of market capitalism well before the beginning of the Great Recession, and that all income and ideological groups have moved in parallel between 1990 and 2008. Yet by examining the extent to which individual-level differences can mirror the dynamics of politics and inequalities, we show that income does not influence statist attitudes equally on the right and on the left. Ideology thus appears to be a good predictor of attitudes toward economic liberalism and a powerful moderator of the influence of income. Finally, we suggest that the coexistence of different attitude dimensions might explain why the public's demand for redistribution has often been disconnected from election outcomes in France.

Redistributive Preferences and Political Participation: Evidence from Norway

The question of how demand for redistribution impacts civic engagement has received little or no attention in the literature. This paper examines the relationship between redistributive attitudes and political participation using national election surveys from Norway. Consistent with the predictions of a redistributive preferences model of participation, individual demand for redistribution is found to positively influence a broad range of political activities in baseline probit regressions. An instrumental variables analysis suggests the baseline estimates are biased due to endogeneity and understate the true effect of redistributive preferences.

Support for the Welfare State Over Time: The Two Dimensions of Redistributive Preferences

Most political economy models start from the assumption that economic self-interest is a key predictor of support for income redistribution. A growing literature, in contrast, emphasizes the role of “other-oriented” concerns, such as social solidarity or affinity for the poor. These frameworks generate distinct, often conflicting predictions about variation in mass attitudes toward redistribution. We argue that this tension is in part an artifact of conceptualizing demand for redistribution as unidimensional, and propose distinguishing between redistribution conceived as taking from the “rich” and redistribution conceived as giving to the “poor”. These two facets of redistribution prime different individual motives: self-oriented income-maximization on the one hand, and other-oriented social affinity with welfare beneficiaries on the other. We find strong evidence for this framework using British longitudinal survey data and cross-sectional data from four advanced industrial countries. We discuss the implications for studying changes in mass support for redistributive social policies.

Hierarchical Modelling of Disparities in Preferences for Redistribution*

AbstractWe evaluate the magnitude of the disparities in the demand for redistribution across European countries and American states during the 2000s. Modelling the demand for redistribution in a multilevel framework, we identify the determinants that contribute the most in predicting support for redistribution. We observe that individual characteristics and contextual variables are associated with demand for redistribution in the same way in Europe and in the US, whereas others exert different influences on the probability of supporting redistribution. We find important differences from some well‐established evidence obtained from data collected for the 1980s and the 1990s.

INCOME INEQUALITY, MOBILITY, AND THE WELFARE STATE: A POLITICAL ECONOMY MODEL

In this paper, we set up a three-period stochastic overlapping-generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.