How Personal Finances Affect Economic Worries and Social Policy Preferences

• In Event: Voting for Welfare: New Economic Risks and Voters’ Demands for Social Policies

Abstract

Across developed countries, the aftermath of the financial crisis has triggered a growing focus on household finances – wealth inequality, indebtedness, exposure to economic shocks and asset bubbles - and its economic and political consequences. However, we know surprisingly little about the relative importance of different micro-level aspects of households’ finances in the formation of economic worries and perceptions of financial insecurity, and the implications for political preferences over redistribution and social insurance. Data with information on economic perceptions and political preferences usually do not include detailed information about household assets and liabilities, we know little about the relative importance of short-term vs long-term debt, liquid vs illiquid wealth, and gross vs net wealth. Furthermore, there is scarce evidence on the comparative perspective on this and the potential role of the welfare state in mitigating the links between household finances, worries, and political preferences. In this paper, we present results from an original large-scale cross-national survey with detailed information on household balance sheets – including a wide range of asset and debt components – and a large set of questions on economic worries and political preferences for nine OECD countries to answer questions about how various forms of financial vulnerability translates into worries and political preferences in a comparative setting. We show how welfare state institutions and credit markets mediate the links between households’ financial situation, economic insecurity, and social policy preferences.

Authors

• Andreas Wiedemann, Princeton University

• Jacob Gerner Hariri, Department of Political Science, University of Copenhagen

• Amalie Sofie Jensen, Princeton University

• David Dreyer Lassen, University of Copenhagen