Inequality, Income Stagnation and Policy Preferences in Western Europe

• In Event: Inequality: Preferences and Public Policy

Abstract

It is a commonplace in recent literature that support for redistribution has not changed much even though income inequality has increasing sharply in OECD countries over the last 20-30 years, suggesting that citizens’ perceptions of inequality are mistaken or, alternatively, that citizens perceive rising inequality as fair. Analyzing ESS data over the period 2002-18, this paper revisits the implications of rising inequality for policy preferences of low- and middle-income citizens. We seek to test two broad hypotheses. The first hypothesis posits that income growth conditions responses to inequality. Generalizing across countries, our evidence suggests that income stagnation since the financial crisis of 2007-08 has rendered the pre-crisis growth of inequality politically salient. The second hypothesis is that levels of redistribution condition responses to inequality in the context of income stagnation. Simply put, we hypothesize that the combination of rising inequality and income stagnation generates support for overall redistribution in countries with weakly redistributive tax-transfer systems (Southern Europe) while it generates support for “welfare chauvinism” in countries with strongly redistributive tax-transfer systems (Northern Europe).

Authors

• Jeremie Poltier, University of Geneva

• Jonas Pontusson, University of Geneva