Civic Attitudes and the Design of Labour Market Institutions: Which Countries Can Implement the Danish Flexicurity Model?

Abstract

This study analyzes the effects of right-wing extremism on the well-being of immigrants based on data from the German Socio-Economic Panel (SOEP) for the years 1984 to 2006 merged with state-level information on election outcomes. The results show that the life satisfaction of immigrants is significantly reduced if right-wing extremism in the native population increases. Moreover ; the life satisfaction of highly educated immigrants is affected more strongly than that of low-skilled immigrants. This supports the view that policies aimed at making immigration more attractive to the high-skilled have to include measures that reduce xenophobic attitudes in the native population. --

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No. 5489

CIVIC ATTITUDES AND THE DESIGN
OF LABOUR MARKET INSTITUTIONS:
WHICH COUNTRIES CAN IMPLEMENT
THE DANISH FLEXICURITY MODEL?


Yann Algan and Pierre Cahuc


LABOUR ECONOMICS

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ISSN 0265-8003
CIVIC ATTITUDES AND THE DESIGN
OF LABOUR MARKET INSTITUTIONS:
WHICH COUNTRIES CAN IMPLEMENT
THE DANISH FLEXICURITY MODEL?
Yann Algan, Université Marne la Vallée, CEPREMAP and CEPR
Pierre Cahuc, CREST-INSEE and CEPR

Discussion Paper No. 5489
February 2006
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Copyright: Yann Algan and Pierre Cahuc

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CEPR Discussion Paper No. 5489
February 2006
ABSTRACT
Civic Attitudes and the Design of Labour Market Institutions: Which
Countries Can Implement the Danish Flexicurity Model?*
We argue that the efficiency of the Danish flexicurity Model, which combines
high unemployment benefits with low job protection and high participation rate,
relies on strong public-spiritedness. We also argue that Continental and
Mediterranean European countries are unlikely to be able to implement the
Danish Model because the lack of public-spiritedness of their citizens raises
moral hazard issues which hinder the implementation of efficient public
unemployment insurance.
JEL Classification: J23, J65 and J68
Keywords: civic attitudes, job protection and unemployment benefits
Yann Algan
Ecole d’éonomie de Paris
48 Jourdan,
75014, Paris
FRANCE
Tel: (33 1) 43 136 238
Fax: (33 1) 43 136 237
Email: yann.algan@ens.fr


For further Discussion Papers by this author see:
www.cepr.org/pubs/new-dps/dplist.asp?authorid=155652
Pierre Cahuc
CREST-INSEE
Timbre J 360
15, Boulevard Gabriel-Peri
92245, Malakoff
FRANCE
Tel: (33 1) 41 173 717
Fax: (33 1) 41 173 724
Email: cahuc@univ-paris1.fr

For further Discussion Papers by this author see:
www.cepr.org/pubs/new-dps/dplist.asp?authorid=125314

* We thank Giuseppe Bertola, Fabien Postel-Vinay, Till von Wachter and
André Zylberberg for very helpful remarks. We also thank participants in
seminars at the 2005 IZA Price Conference in Berlin, at Columbia University,
at Paris School of Economics and at the IZA workshop on job protection and
labour markets. The usual disclaimer applies.

Submitted 11 January 2006

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1Introduction
In June 2005, the Danish Minister of Employment Claus Hjort Frederiksen claimed at a confer-
ence on flexicurity that: “the Danish flexicurity model has been proclaimed to be the panacea
that will solve all the problems on the French labour market (...) And there are many good
reasons why the French are looking to Denmark for inspiration: 1) Denmark is among the Eu-
ropean countries with the highest employment rates and the lowest unemployment rates. 2)
Danish employees are in the forefront internationally when it comes to how they see their job
security. 3) Denmark is also in the top class as regards job satisfaction”.1
The Danes can be proud: the Danish flexicurity model does not look attractive only in
France. It is attractive for many European countries because it has been able to combine high
participation rates with generous safety nets. For a decade now, the European Commission
advised European countries to adopt the main features of the flexicurity model in order to
increase labor market efficiency. Yet, although many features of the Danish Model look ideal
for the European Commission, the labor market institutions and labor market outcomes of
European countries are still very different from those of Denmark. The most striking difference
is to be found in the combination of unemployment benefits and job protection, which are the
main devices to protect workers against the risk of unemployment. As shown in Figure 1,2a
trade-off shows up between unemployment benefits and employment protection in European
countries (see Boeri et al., 2004, and Clark and Postel-Vinay, 2005). Mediterranean countries
and (to a lesser extent) Continental European countries have lower unemployment benefits but
more stringent job protection compared to Denmark, which appears as a clear outlier on this
issue.
As noted by Freeman (2000), the emergence of a set of labor market institutions heralded
by policy analysts and economists is not new. And Freeman argues that diversity of labor
market institutions among advanced countries stems from cross-country differences in values
over distributional issues because labor market institutions have large effects on distribution,
but modest hard-to-uncover effects on efficiency. This relativist conception, according to which
the choice of labor market institutions is a matter of taste, unrelated to efficiency, is often
advocated. For instance, some contributions have claimed that differences in labor market
1This speech is available at http://www.bm.dk/ministeren/taler/050616_uk.asp.
2The figures of the introduction are focused on European countries only. The trade-off between unemployment
benefits and legislation protecting employment is less clear-cut in a two dimensional space when other countries
are accounted for. In particular, Anglo-Saxon countries, in which there is less redistribution of income, have
lower unemployment benefits than expected because unemployment benefits are influenced by insurance and
redistributional purposes. Such effects are taken into account in the empirical section of the paper. Unemployment
benefits are computed as the share of GDP per capita expenditure per unemployed worker provided by the OECD.
Job protection is proxied by the OECD index on regular and temporary contracts (EPL1 indicator).
1

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Aut
Bg
Dk
Fin
Fra
Ger
Gre
Ita
N th
Nw
Pt
Sp
Swd
0
20
40
60
80
Unemployment benefits
1
1.5
2
Job protection
R²=0.76
Figure 1: Unemployment benefits and Job protection in the end of the 1990s. Source: OECD.
institutions and outcomes are rooted in the higher weight put on home production in European
countries (Rogerson, 2003, Freeman and Shettkat, 2005), or come from stronger preferences
for leisure (Blanchard, 2004, Alesina et al., 2005) and from more traditional family values in
Continental European countries and Mediterranean countries (Algan and Cahuc, 2005).
The efficiency of the Danish flexicurity Model seems to contradict this common relativist
stand. Figure 2 shows that European countries with high unemployment benefits and weak job
protection ratio are also those in which participation rates are high.3Moreover, studies based
on individual subjective data suggest that individuals feel better protected by unemployment
benefits rather than by employment protection (Clark and Postel-Vinay, 2005).
From this perspective, it becomes hard to understand why European countries do not im-
plement the flexicurity model. The aim of our paper is to provide an explanation for this
puzzle. We argue that the flexicurity model is hardly sustainable in countries displaying weak
public-spiritedness because the unemployment insurance design raises moral hazard issues that
are much more difficult to overcome in countries where individuals are more prone to cheat
over government benefits. Besides, we are also able to document that civic attitudes cannot be
systematically changed quickly just by changing institutions. This result has far-reaching conse-
quences for the policy reforms agenda. It indicates that civic attitudes impose real constraints
3This Figure, which is provided for an illustrative purpose, should not be over interpreted. The econometric
section of the paper provides much more rigorous empirical evidence on the link between unemployment benefits
and job protection on one hand, and labor market performance on the other hand.
2

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Aut
Bg
Dk
Fin
Fra
Ger
Gre
Ita
Nth
Nw
Pt
Sp
Swd
60
65
70
75
80
85
Participation rate
0
20
Unemployment benefits
40
60
80
R²=0.34
Aut
Bg
Dk
Fin
Fra
Ger
Gre
Ita
Nth
Nw
Pt
Sp
Swd
60
65
70
75
80
85
Participation rate
1
1.5
2
Job protection
R²=0.35
Figure 2: Unemployment benefits, job protection and participation rate in the end of the 1990s.
Source: OECD.
3

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on the choice of labor market institutions. From this point of view, it is unlikely that countries
with weak public-spiritedness can implement the Danish Model without specific action aimed
at changing the values of their citizens.4
It is worth noticing that our conclusions are in line with those of the literature focused on the
interactions between culture, institutions and economic outcomes. This literature, which recently
had a new start in economics thanks to the availability of new international surveys,5shows
that individuals’ preferences and priors are rooted in cultural orientations acquired through
socialization within a society’s historical heritage. Moreover, those priors and preferences have
an impact on outcomes. For instance, cultural differences turn out to have an impact on savings
across countries (Guiso et al., 2005), but also on fertility rates (Fernandez et al., 2004, Fernandez
and Fogli., 2005), on employment rates (Algan and Cahuc, 2005, Fernandez and Fogli., 2005), on
individuals’ prior on social mobility (Alesina and Glaeser, 2004) and on trust shown towards a
third party (Guiso et al., 2003). In the same spirit, the paper of Ichino and Maggi (2000), which
documents the existence of north-south regional differences in regard to shirking of responsibility
in a large Italian bank, suggests that the degree of ‘civicness’ is influenced by individuals’
historical heritage.6This literature has also stressed that the degree of trust and of ‘civicness’
has an impact on economic outcome. For instance, Guiso et al. (2004) find that a country whose
residents trust residents of another country more tend to exchange more goods and financial
assets with it. Tabellini (2005) estimates that GDP per capita and growth are higher in European
regions that exhibit higher degree of values such as trust, respect for others, and confidence in
individual self-determination. Tabellini shows that those values are related to historical variables
such as the literacy rate at the end of the 19thcentury, and the political institutions in place
over the past several centuries. From this point of view, the customary priors and preferences
that ethnic and social groups transmit seem to remain fairly unchanged across generations. All
these findings are in line with our results, which are obtained in two steps.
First (section 2), we provide a model in which unemployment insurance and job protection
are shaped by a government7which implements a policy platform that has won an electoral
4Blanchard and Philippon (2004) follow a similar route by showing that the cross-country heterogeneity in the
quality of labor relations between employers and employees is deeply ingrained in cultural features.
5See the survey of Guiso et al. (2005).
6This idea has been explored in sociology and political science by Banfield (1958) and Putnam (1993).
7In the seminal papers of the “implicit contract” (Baily, 1974, Azariadis, 1975), unemployment insurance is
provided by employers. However, in the real world, unemployment insurance is always provided by government or
public agencies and not by firms because selection and moral hazard problems prevent firms offering unemployment
benefits (Kiander, 1993, Chui and Karni, 1998). When unemployment insurance is provided by public authorities,
it is worth introducing employment protection, under the form of layoff taxes, to induce firms to take account
of the fiscal externalities linked to their job destruction decisions (Feldstein, 1976, Burdett and Wright, 1989a,b,
Blanchard and Tirole, 2004).
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competition.8This model shows that the provision of unemployment insurance is more costly in
economies in which civic attitudes make it more acceptable to cheat on unemployment benefits,
leading the government to provide lower unemployment benefits. Conversely, employees are
protected thanks to more stringent employment protection. But the lack of unemployment
insurance due to moral hazard is detrimental to labor market participation. In this context,
moral hazard hampers government’s ability to implement efficient labor market institutions
which undermines participation rates.
Secondly (section 3), we use international individual surveys to document how attitudes to-
ward government benefits are shaped to a large extent by country specific effects. Additionally,
we highlight the link between civic attitudes and behavior towards government benefits: we
show that individuals who exhibit low concern for civic values are more often unemployed when
they can benefit from generous government benefits and, conversely, less often unemployed if job
offers are scarce due to stringent employment protection legislation. Aggregate panel data also
show that countries in which a large fraction of the population considers that it is not justifiable
to claim government benefits to which you are not entitled also have high unemployment ben-
efits, low job protection and high participation rates. Obviously, the correlation between civic
attitudes and the design of labor market institutions does not mean that the causal relation
goes from social attitudes to the unemployment benefits/employment protection ratio. Yet we
provide some evidence of such a causal relationship by showing that people who face the same
economic environment by living in the same country, but who differ in the national origin of
their ancestors, have significantly different attitudes towards government benefits. The influence
of national backgrounds still holds when controlling for the individual socioeconomic character-
istics.9Moreover, their civic attitudes are perfectly in line with those currently expressed in their
country of origin. This suggests that civic attitudes towards government benefits are rooted in
country specific features which have long lasting effects on individuals.
8Electoral competition is represented by the probabilistic voting model: see Persson and Tabelini (2000).
9This type of empirical strategy has been used by Reimers (1985), Blau (1992), Carroll et al. (1999), Antecol
(2000), Guinnane et al. (2002), Giuliano (2004), Fernandez and Fogli (2005) and Algan and Cahuc (2005). Blau
(1992) and Guinnane et al. (2002) examine whether the fertility of immigrants differs from that of the native
born in the US. Reimers (1985) and Antecol (2000) study the effect of the country of origin on the labor force
participation of immigrants. Using the same approach, Giuliano (2004) focuses on family leaving arrangements
and Fernandez and Fogli (2005) analyse female labor participation and fertility. Caroll et al. (1999) use this
approach for the analysis of saving behavior. Algan and Cahuc (2005) look at family values. All these studies
find a significant influence of the country of origin on cultural values, behavior and economic outcomes.
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2The model
We consider an economy in which a numeraire good is produced thanks to labor. There is a
continuum of mass 1 of individuals. Individuals differ in their taste for leisure whose continu-
ous differentiable cumulative distribution function is denoted by H(h) : R →[0,1]. As regards
consumption and leisure, the preferences of the type-h individuals are represented by the utility
function v(c) + ℓh, where c ≥ 0 stands for consumption, v is an increasing, concave and twice
derivable function, and ℓ denotes leisure. Inactive individuals get ℓ = 1 and c = 0. Active indi-
viduals can be either employed or unemployed. Employed workers get a wage, denoted by w, but
do not benefit from any leisure: ℓ = 0. Thus, the utility level of an employee amounts to v(w).
Unemployed workers get unemployment benefits, provided by the government, denoted by b.
Unemployed workers choose a level of search effort that could be either low or high because the
government cannot perfectly monitor search activity. The utility level of unemployed workers
who produce the high level of search effort is worth v(b) because the leisure cost of the high
search effort is assumed to be the same as the leisure cost of waged work. The utility level of
unemployed workers who produce the low level of search effort amounts to v(b)+(1−α)h−γ.
The term (1 − α)h shows up because job search effort is not perfectly monitored by the gov-
ernment: the government can force job seekers to devote only a share α ∈ (0,1) to job search
activities. γ ≥ 0 stands for the utility loss induced by individuals’ feeling of guilt about cheating
on unemployment benefits. In the following, we focus on the consequences of such guilty feelings
on the design of unemployment insurance and job protection.
There is potentially a large number of firms that can create jobs. Creating a job entails
fixed costs denoted by k > 0. A job produces x units of the numeraire good, where x ∈ R
is an idiosyncratic shock drawn in a distribution with a continuous differentiable cumulative
distribution function denoted by G. The productivity shock, x, which is private information
held by the firm, is not contractible. Firms enter into competition to offer wages to workers. As
workers are assumed to be perfectly mobile, competition between firms entails zero profit.
There is a government which provides unemployment benefits, financed by payroll taxes,
denoted by τ, and by layoff taxes, denoted by f. The policy of the government is determined by
elections.
The time sequence of events runs as follows:
1) Individuals vote on the policy platforms (τ,f,b).
2) Individuals decide whether to be active or not.
3) Workers choose their level of search effort. Only workers who produce the high level of search
effort are matched with firms. The others are unemployed and get the unemployment benefits
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b.
4) Employers compete to hire workers.
5) The idiosyncratic productivity shocks x occur and employers decide whether they keep the
workers or they cut the jobs. Then, employers pay wages and payroll taxes on every continuing
job. Every job-cut gives rise to the payment of layoff taxes. Employed workers get the wage w,
unemployed workers get unemployment benefits b.
This problem can be solved by backward induction. The market equilibrium is solved in the
first stage. Then, the outcome of elections is determined.
Market equilibrium
Market equilibrium yields labor contracts that allow workers to achieve the maximum level
of expected utility compatible with zero expected profits. Labor contracts only include wages
since the reservation value of the productivity parameter x is not contractible and firms cannot
commit ex-ante to this reservation value by keeping aside funds payable to a third party in
case of layoff (see the discussion in Blanchard and Tirole, 2004). Accordingly, at step 5) firms
destroy jobs if - and only if - their profits, x−w−τ, are lower than their destruction costs, −f.
The job destruction decision boils down to the choice of a reservation value for the productivity
parameter x, denoted by X, below which jobs are destroyed. The reservation productivity reads:
X = w + τ −f.
(1)
The job destruction rate is equal to G(X). Given the expression X of the reservation pro-
ductivity, there is a single value10of the wage compatible with the zero profit condition
?+∞
X
(x − w − τ)dG(x) − G(X)f = k.
(2)
Individuals whose utility in inactivity, v(0) + h, is lower than their expected utility when
they are active decide to enter into the labor market. The expected utility of a type-h active
individual is
V = max{[1 −G(X)]v(w) + G(X)v(b),v(b) + (1 − α)h − γ}.
10As the expected profit decreases with respect to w, there is a single positive equilibrium value for the wage if
- and only if - the two following conditions are fulfilled:
?+∞
τ−f
(x − τ)dG(x) − G(τ − f)f − k > 0,
lim
w→∞
?+∞
w+τ−f
(x − w − τ)dG(x) − G(w + τ − f)f − k < 0.
These conditions are assumed to be fulfilled.
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Therefore, the threshold value¯h of the taste for leisure below which individuals enter into the
labor market solves
v(0) +¯h = max?[1 − G(X)]v(w) + G(X)v(b),v(b) + (1 − α)¯h − γ?,
and the participation rate amounts to H(¯h).
(3)
Equations (1), (2) and (3) define the market equilibrium value of the wage w, the reser-
vation productivity X and the participation rate H(¯h). Let us now analyze the choice of the
unemployment benefits, the payroll taxes and the layoff taxes.
Equilibrium policy
The elections are represented by the probabilistic voting model (see Persson and Tabelini,
2000, chapter 3) in which there are two candidates who announce their electoral platforms si-
multaneously and non-cooperatively. Then, individuals, who are influenced by ideological biases,
vote. The candidate who gets the majority is elected and implements her announced policy plat-
form. Under certain assumptions for simplification, which are adopted henceforth, the outcome
of the vote maximizes the sum of expected utilities.11Accordingly, the optimal choice of the
elected candidate maximizes
? ¯h
0
{[1 − G(X)]v(w) + G(X)v(b)}dH(h) +
?+∞
¯h
[v(0) + h]dH(h),
subject to four constraints.12
1. The incentive compatibility constraint
[1 − G(X)]v(w) + G(X)v(b) ≥ v(b) + (1 − α)h −γ,∀h ≤¯h.
(4)
2. The government balanced budget constraint:
[τ [1 − G(X)] + (f − b)G(X)]H(¯h) = 0.
(5)
3. The zero profit condition (2).
4. The participation constraint (3).
11This outcome can be derived from the simple case in which each group of individuals of type-h is heterogeneous
with respect to ideological biases towards the two candidates. Then, following Persson and Tabelini (2000) it turns
out that the outcome of the elections maximizes the utilitarian criterion if the ideological bias is represented by
an additive term in the utility function and is distributed with a uniform distribution that is the same for all
type-h individuals.
12We apply the revelation principle.
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It is useful to rewrite this program as the maximization of the sum of expected utilities
with respect to (w,X,b) subject to the incentive compatibility constraint (4), the participation
constraint (3) and to the equation
?+∞
X
(x − w)dG(x) − G(X)b = k,
(6)
that is obtained by summing up the balanced budget constraint of the government (5) and the
zero profit condition (2). Then, once the optimal value of (w,X,b) is determined, it is possible
to use equations (1) and (2) to find out the optimal value of (τ,f,b).
The computation of the optimal values for (w,X,b), presented in appendix A, allows us to
claim that:
Result 1: Full insurance, with w = b, can be obtained only if utility losses induced by guilt
feelings are sufficiently large.
When the utility cost of cheating on unemployment benefits is high, the incentive compati-
bility condition (4) is not binding and the government can provide full insurance. It also turns
out that the reservation productivity amounts to zero (X = 0) when individuals are perfectly
insured. Otherwise, the optimal value of (w,X,b) is defined by equation (6) and by:
X = w − b −v(w) − v(b)
v′(w)
,
(7)
v(w) −v(b) =(1 − α)[v(b) − v(0)] − γ
α[1 − G(X)]
.
(8)
Equation (8) is merely the binding incentive compatibility condition, which shows that the
wage is larger than the unemployment benefits if utility losses associated with guilt feelings are
small enough.13Equation (7) shows that the government decides to keep jobs filled up to the
point where the utility cost (in numeraire good units) of job destruction,
v(w)−v(b)
v′(w)
, is equal to
the gains of job destruction, w − b −x.
These two equations allow us to claim the following result which is proved in appendix B:
Result 2: The unemployment benefits and the reservation productivity increase with respect to
feelings of guilt.
Result 2 can be understood as follows. First, when feelings of guilt are lower, unemployment
benefits are decreased to insure that workers devote sufficient effort to job search. Furthermore,
13A more rigourous presentation is provided in appendix A.
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when guilt feelings are decreased, as v(w) − v(b) =
(1−α)[v(b)−v(0)]−γ
α[1−G(X)]
, the utility cost of job
destruction is increased and the optimal reservation productivity drops.
The scheme (τ,f,b) that allows the government to implement the optimal value of (w,X,b)
is defined by equation (7), by the definition of the reservation productivity (1) and by the zero
profit condition (2) which reads, using (1):
f =
?+∞
X
(x − X)dG(x) − k.
This last expression of the zero profit condition implies that layoff taxes decrease with the
reservation productivity, which leads to the following result:
Result 3: Layoff taxes decrease with respect to feelings of guilt.
The following result is also proved in appendix C:
Result 4: The expected utility of active workers and the participation rate are lower when there
are less feelings of guilt.
The participation rate H(¯h) increases with γ since the optimal response of the government
is to provide less insurance against productivity shocks when it becomes less costly to cheat
on unemployment benefits: unemployment benefits are lower and employment protection more
stringent. The lower degree of insurance, which decreases the expected utility of active indi-
viduals, implies that labor market participation falls. Thus, in equilibrium, any increase in
the utility cost of guilty feelings allows individuals to reach better allocations according to the
Pareto criterion. From this perspective, more public-spiritedness improves efficiency.
The next section provides empirical tests of the main predictions of the theoretical model, ac-
cording to which better civic attitudes towards government benefits lead to lower job protection,
higher unemployment benefits and higher participation rates.
3Empirical results
In this section we document to what extent people living in different OECD countries differ
in their civic attitudes towards government benefits. Then, we provide evidence showing that
cross country differences in civic attitudes and economic behaviors are rooted in national cultural
values that shape employment protection and unemployment benefits legislations. Our empirical
strategy is organized in four steps.
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Firstly, we show that civic attitudes are correlated with country specific features rather than
with individual characteristics, providing a rationale for the observed cross-country heterogeneity
in labor market institutions.
Secondly, we uncover the causal link between civic attitudes and institutions by documenting
the inertia of civic attitudes with respect to changes in the economic and institutional environ-
ment. It might be the case that civic values are strongly influenced by the current features of
the national institutions. For instance people might feel less guilty about cheating on taxes in
countries plagued by administrative inefficiencies. Or people could feel guiltier if they live in an
environment in which everybody checks the attitude of others. But the relationship could also
go the other way around: civic attitudes might be difficult to change because they are deeply
rooted in specific culture and people facing the same incentives could react differently depending
on their cultural background. The scope for policy reforms largely depends on the answer to
this issue. If civic attitudes are strongly influenced by current institutions, there is room for
policy actions on the labor market which could quickly change individual behavior. If culture
matters and has a long lasting effects on civic attitudes, then this cannot be changed quickly by
alterations to labor market institutions. The Danish flexicurity model cannot be implemented
without specific actions aimed at changing civic attitudes.
To tackle this issue, we analyze civic attitudes of people who come from different national
origins but who face the same economic environment, living in the same country, namely the
United States. It turns out that there is a strong inertia in civic attitudes and that it is culture
which truly matters in this realm.
Third, we document the link between civic attitudes and individual behavior. We show
that individuals who exhibit low concern for civic values are also more frequently unemployed.
Furthermore, these individuals have an increased probability of being unemployed in order to
take advantage of generous government benefits and, conversely, a lower probability of being
unemployed if job offers are scarce due to stringent employment protection legislation. This
step leads us to conclude that national cultural features have long lasting and consistent effects
on both civic virtue and economic behavior.
Then, as a fourth and last step, we estimate the aggregate outcomes of such individual values
and economic behavior in OECD countries over the period 1980-2003. We show a significant
correlation between civic attitudes, on one hand, and job protection and unemployment benefits,
on the other hand, which can be interpreted as a direct causal outcome of civic attitudes to
institutions.
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3.1Cross countries heterogeneity in civic attitudes and economic behaviors
3.1.1Database on civic attitudes
The measure of cross-country differences in civic attitudes is based on two international so-
cial surveys: the World Value Survey (WVS) and the International Social Survey Programme
(ISSP). The key advantage of these surveys is that they provide harmonized questions on civic at-
titudes for an extensive set of countries, including OECD countries, Eastern European countries
and Latin American countries. The WVS covers three main waves (1980, 1990, 1999-2001)14
and the ISSP provides specific questions on civic attitudes in two surveys on religion in 1991
and 1998. These two different databases are complementary in as much as they report the same
kind of questions on civic attitudes but provide different controls to estimate the determinants of
public-spiritedness. The WVS covers a larger set of countries and a greater time-span than the
ISSP. But the latter database provides information on the countries of origin for the ancestors
of the respondent, allowing us to push further the analysis of the cultural foundations of civic
attitudes.
In both surveys respondents were asked a question directly related to civic attitudes to-
wards government benefits. The question reported in the WVS database reads as follows: “Do
you think it can always be justified, never be justified or something in between to claim govern-
ment/state benefits to which you have no rights”. The answers are given on an ordered scale
from 1 for “Never justifiable” to 10 for “Always justifiable”. The wording in the ISSP database
is somewhat similar: “Do you feel it is wrong or not wrong if a person gives the government
incorrect information about himself/herself to get government benefits that she/ he is not entitled
to?”. The answer ranges from 1 to 4, which correspond to “Seriously wrong”, “Wrong”, “A bit
wrong” and “Not wrong”. To ease the interpretation of the results, we group the answer cate-
gories together to represent individuals with strong civic attitudes. Hence we create a dummy
variable which takes on the value 1 if the respondent answered “Seriously wrong” in the ISSP
and “Never justifiable” in the WVS, and 0 otherwise. As a robustness check, all the estimations
have also been run on the original variables without any significant changes in the results (see
Appendix E).
The analysis includes the main OECD countries: Australia, Austria, Belgium, Canada,
Denmark, France, Germany, Ireland, Italy, Japan, Mexico, Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, UK and USA. We also include Chile in order to get
richer information on Latin American countries. Actually, Latin American countries provide a
14The World Value Survey also had a wave in 1995 but for a smaller set of countries and questions.
12