Friday, March 14, 2014
Hampton (Omni Shoreham)
Recent research has demonstrated that people act with “other-regarding” motives and are not merely “self-interested” in the stylized sense of homo economicus. Do such other-regarding incentives shape individual-level support for policies that redistribute income from richer to poorer citizens? If they do, in what ways do such incentives matter? Drawing from the rich theoretical literature on individual preferences, we elaborate and test a series of propositions using data from the European Social Survey to address these questions. Theory suggests that the demand for redistribution will be a function of both one’s own income relative to average income as well as the existing degree of macro-level inequality. We emphasize that other-regarding interests can have directly opposite implications for redistributive preferences: individuals’ demand for redistribution will increase with inequality if they care primarily about economic outcomes (as in Fehr and Schmidt (1999)), but will decrease with inequality if they care primarily about “fairness” (as in Alesina and Angeletos (2005)). Our current empirical investigations suggest that: (1) self-interest matters: poorer individuals tend to favor more redistribution than richer individuals; (2) in line with Fehr and Schmidt, but not Alesina and Angeletos, demand for redistribution increases as inequality increases; and (3) rich individuals’ preferences for redistribution change more with changing levels of inequality than poor individuals’ preferences. The support we find for Fehr and Schmidt preferences presents an interesting puzzle we will explore further: if individual support for redistribution increases as inequality grows, why do more unequal countries tend to redistribute less?
