Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution

Neustadt, Ilja; Zweifel, Peter

doi:10.2139/ssrn.1621086

Cited by 25 publications

(6 citation statements)

References 86 publications

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“…This result is in line with Hypothesis 2. Neustadt and Zweifel (2010a) present results in contradiction to the POUM hypothesis. Swiss citizens expecting no future upward or downward mobility in income are the least willing to pay for redistribution.…”

contrasting

confidence: 99%

“…Neustadt and Zweifel (2010a) find that individuals within the lowest income category exhibit the lowest MWTP for redistribution.…”

Section: Meltzer-richard-hypothesismentioning

confidence: 80%

“…Hence, individuals grouping themselves in a lower social category have a higher preference for redistribution than individuals belonging to the middle class. Neustadt and Zweifel (2010a) show that Swiss citizens of the highest social class state the highest MWTP. In this case these findings support the results presented in this paper.…”

Section: Meltzer-richard-hypothesismentioning

confidence: 97%

“…With the exception of the studies of Neustadt and Zweifel (2010a;2010b) andNeustadt (2011), no study measuring the preferences for redistribution using a DCE exists. The authors underline the applicability of a DCE to elicit citizens' preferences.…”

mentioning

confidence: 99%

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

Pfarr

2012

SSRN Journal

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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.Keywords: redistributive preferences, social mobility, median voter. JEL: C93, D31, D63, H23.©2012 by Christian Pfarr. All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorization of the author. MotivationIn Germany, as in most industrialized countries, income inequality has steadily increased (see OECD 2011a, 2011b). The government tries to affect the pre-tax income distribution by collecting taxes and granting monetary transfers. By doing so, income inequality between pre-tax and net incomes is reduced by about 40 % on average in Germany as measured by the Ginicoefficient (see Pfarr 2013, p. 3, SVR 2011. This strong governmental involvement calls for a detailed analysis of redistributive policies. Whereas the supply of redistribution is relatively easy to measure, the determinants of the demand for redistribution are controversially discussed in international literature. According to Alesina and Glaeser (2004), most studies cover economic, institutional or behavioral factors. This study concentrates on the economic factors encompassing the traditional Meltzer-Richard hypothesis and the social mobility hypothesis.In economic theory, redistribution is usually interpreted as the result of a voting mechanism.Individuals express their demand for redistribution in line with their preferences, and political parties act as the supplier thereof. Most of the existing literature concentrating on the determinants for individuals' redistributive preferences is not able to differentiate between these two sides. Moreover, as these studies use survey data, they cannot predict individuals' decision making under the restrictions of their budget constraint.The contribution of this study is twofold. First, the paper aims at eliciting preferences for redistribution in Germany with the help of a Discrete Choice Experiment (DCE), based on a represent...

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contrasting

confidence: 99%

“…Neustadt and Zweifel (2010a) find that individuals within the lowest income category exhibit the lowest MWTP for redistribution.…”

Section: Meltzer-richard-hypothesismentioning

confidence: 80%

Section: Meltzer-richard-hypothesismentioning

confidence: 97%

mentioning

confidence: 99%

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

Pfarr

2012

SSRN Journal

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“…Based on the assumption of inequality aversion, Neustadt and Zweifel (2010b) formulate two hypotheses to be tested. The first predicts that the citizens with higher inequality aversion exhibit a positive WTP for redistribution while those with lower inequality aversion, a negative one.…”

Section: General Determinants Of the Demand For Income Redistributionmentioning

confidence: 99%

Do Religious Beliefs Explain Preferences for Income Redistribution? Experimental Evidence

Neustadt¹

2011

CESifo Economic Studies

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Due to the mixed empirical evidence bearing on the economic determinants, beliefs have been at the center of attention of research into preferences for income redistribution. We elicit preferences for income redistribution through a Discrete Choice Experiment performed in 2008 in Switzerland and relate them to several behavioral determinants, in particular to religious beliefs. Estimated marginal willingness to pay (WTP) is positive among those who do not belong to a religious denomination, and negative otherwise. However, the marginal WTP is shown to increase with a higher degree of religiosity.Moreover, those who state that luck or connections play a crucial role in determining economic success exhibit significantly higher WTP values than those who deem effort to be decisive.

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Europe’s Great Depression: Coordination Failure after the First World War

Wolf¹

2013

The Great Depression of the 1930s

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. had not yet come to an end -indeed it did not end before 1945. Both, domestic and international institutions suffered from a lack of reciprocal trust and commitment, which can be clearly illustrated in the realm of monetary policy but affected many other areas of policymaking, such as energy or migration policies. These institutions in turn affected expectations and thereby the extent to which for example expansionary policies could be effective. Terms of use: Documents in EconStor mayJEL-Code: E50, F50, N14.

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Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution

Cited by 25 publications

References 86 publications

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

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

Do Religious Beliefs Explain Preferences for Income Redistribution? Experimental Evidence

Europe’s Great Depression: Coordination Failure after the First World War

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