Working Paper

Why do Preferences for Redistribution Differ Across Countries?

Kiel Working Papers, 2230 Download PDF

We provide an experimental test of theories to explain differences in redistribution preferences across countries. We involved participants in standardized situations of redistribution in four Western countries, varying the relevance of self-interest and uncertainty over initial earnings. Demand for redistribution is, on average, lower in the US and Italy than in Norway and Germany, regardless of whether self-interest is relevant. When self-interest matters, differences across countries are driven by a larger share of participants who earn (or expect to earn) below-median incomes behaving as "libertarians" - thus letting rich people keep their earnings - in the US and Italy than in Germany and Norway. Those earning (or expecting to earn) above the median behave similarly across countries. This result suggests that international differences in redistribution depend more on how the poor accept the rich’s legitimacy to earn high incomes rather than the rich’s solidarity toward the poor. US Americans and Italians are significantly more overconfident than Norwegians and Germans, thus further reducing their demand for redistribution under uncertainty. We find support for the "Prospect of Upward Mobility" hypothesis in all countries. Contrary to our hypotheses, US Americans do not reward individual merit more than others, particularly when self-interest is at stake. The reason is that luck is considered as important as merit for the rich’s entitlement to high earnings. This result suggests revisiting common narratives on how meritocracy and tolerance of inequality are related.

Authors

Francesco Farina
Anna Conte

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Publication Date
JEL Classification
C92; D63; H23

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