Insurance Effects on Support for Redistribution

• In Event: Experimental Approaches to Taxation and Redistribution

Abstract

Most distributive theories in political economy understand individuals to be motivated
by material self-interest, often approximated by their current positions in the income
distribution. It has become increasingly common, however, to also conceptualise
material self-interest inter-temporally. This approach extends the more direct focus on
effects of contemporary relative income (as in Romer 1975 and Meltzer and Richard
1981) and opens the door to arguments about insurance and risk (as in Sinn 1995;
Moene and Wallerstein 2001; Iversen and Soskice 2001; Rehm 2009), and about
social mobility and life-cycle profiles (Benabou and Ok 2001; Haider and Solon 2006;
Alesina and Giuliano 2011; Rueda and Stegmueller Forthcoming). Distinguishing
between redistribution (in the present) and insurance (against something that could
happen in the future), however, is theoretically and empirically challenging. In
this paper, we propose that the effects of insurance motivations on support for
redistribution are income dependent, and conditional on the design of the social
insurance scheme. We distinguish our argument from other theoretical alternatives
and explore its implications through an observational analysis of European Social
Survey data and a laboratory experiment designed to separate the influence of
redistribution and insurance motivations that we conducted through the Nuffield
Centre for Experimental Social Sciences (CESS) in the United Kingdom and Chile.

Authors

• Karl Ljungstrom Kahn, University of Oxford

• David Rueda, University of Oxford