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Social Limits to Redistribution

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... The hypothesis that the desire to obtain high status shapes individual preferences for redistribution is therefore validated. 3 Closely related to this study is another by the same authors: Corneo and Grüner (2000). Both studies highlight the relevance of status effects in influencing agents' redistributive preferences. ...
... Both studies highlight the relevance of status effects in influencing agents' redistributive preferences. However, while Corneo and Grüner (2002) is an empirical paper, Corneo and Grüner (2000) is mainly theoretical. Corneo and Grüner (2000) aim to rationalize a puzzling observation, namely the fact that the possibility to express one's own preferences about redistribution (i.e., the right to vote about taxes) is more prevalent in countries that feature pronounced income inequalities. ...
... However, while Corneo and Grüner (2002) is an empirical paper, Corneo and Grüner (2000) is mainly theoretical. Corneo and Grüner (2000) aim to rationalize a puzzling observation, namely the fact that the possibility to express one's own preferences about redistribution (i.e., the right to vote about taxes) is more prevalent in countries that feature pronounced income inequalities. Given that the income distribution is typically right-skewed (i.e., the median voter has an income below the mean), why then people do not vote for more redistribution? ...
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The author reviews recent studies that investigate how social status concerns influence individual preferences for redistribution and impact the design of optimal tax policies. He focuses on two aspects: the relevant dimension over which relative concerns are defined and the different formalizations of the notion of social status that the authors provide.
... On the light of these observations, Corneo and Gruner (2000) investigate the relationship between the social organization and redistributive preferences in the presence of status-seeking behavior. In particular, they show that when inequality has an informational value for social decisions, more conservative redistributive policies might be preferred in equilibrium despite the inequality in the distribution of wealth. ...
... Differently, Gallice and Grillo (2018b) study whether social concerns increase or decrease income and educational inequality when status also depends on the relative individual's achievement in education. 2 In this article, I extend Corneo and Gruner (2000) work allowing individuals to signal their relative standing through the consumption of a conspicuous good as in Bilancini and Boncinelli (2012). The model develops as follows. ...
... The payoff derived from matching with an individual belonging to class K is k = l, m, h with l < m < h. Corneo and Gruner (2000) refer to k as the social value of the class which I will refer to as social status. Notice that it is implicitly assumed a positive relationship between social status and wealth, the latter measured by R K . ...
Article
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In this article the author considers an economy in which individuals are matched into pairs and the desirability of an individual depends on her position on the distribution of wealth. He assumes that individuals show their relative standing by consuming a conspicuous good and he shows that there exist different social norms supporting different matching arrangements. In addition, individuals have to vote over a redistributive policy and the author shows that, despite the desirability of the full redistributive outcomes, under some economic conditions the medium class is able to match with the high class in exchange of a minimum level of redistribution of wealth which keeps the low class far from economic and social opportunities.
... This paper links the automatability of work, specifically individuals' risk of losing their job due to automation, to preferences for redistribution. Redistributing material wealth has traditionally been one of the most important roles played by governments and individuals' preferences for redistribution have been widely studied (Corneo and Grüner, 2000;Pittau, Massari and Zelli, 2013;Kuziemko et al., 2015;Gärtner, Mollerstrom and Seim, 2017). The workhorse model for understanding differences in preferences for redistribution comes from Meltzer and Richards' (1981) seminal work, which emphasizes the role of individuals' income (relative to the median). ...
... Whereas the analyses using ESS data are the main analyses, part of the robustness checks involves considering samples of individuals from two alternative data sources. The first of these alternative sources are the 1992 and 1999 ISSP modules on Social Inequality or ISSP-SI (ISSP Research Group, 2014), which include data on respondents from 22 country regions and are commonly used to study preferences for redistribution (Corneo and Grüner, 2000). 7 A chief motivation for using data from the ISSP-SI is that the ISSP-SI includes interesting individual-level control variables not available in the ESS, particularly on household income and perceived relative social status of one's family. ...
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Although the importance of technological change for increasing prosperity is undisputed and economists typically deem it unlikely that labour-saving technology causes long-term employment or income losses, people’s anxiety about automation and its distributive consequences can be an important shaper of economic and social policies. This paper considers the political economy of automation, proposing that individuals in occupations more at risk of job loss due to automation have stronger preferences for government redistribution. I analyse individual-level cross-national data from the European Social Survey and other sources, covering up to 32 countries and more than 170,000 individuals. I find a robust positive association between occupational automation risk and preferences for redistribution. As long as the conditional (mean) independence assumption is satisfied, my estimates suggest that a one standard deviation increase in automatability increases preferences for redistribution with roughly 0.05 standard deviations, which is comparable to the difference in preferences for redistribution between women and men.
... An early model that portrays an indirect feedback effect of redistribution on societal concerns ( 2 ≠ 0) is Corneo and Grüner (2000). Again, the population is divided into three wealth classes; here, however, class differences indicate not only differences in wealth but also differences in social attributes: the average "social value" (ℎ > > ) in each class correlates with wealth ( ℎ > > ). ...
... The agents' utility derived from social interaction can be assumed to depend on the quality of their immediate social environment that ranges from their spouses, people living in their neighborhood, to fellow cub members and hotel guests. The Corneo and Grüner (2000) model uses spouse matching as an example. Wealth and social value are assumed to be private information, consumption can however be observed and thus serves as a signal of social value. ...
... First, one might consider the distance to the poor, which may influence the median-income voter in two very different ways. According to the social rivalry theory proposed by Corneo and Grüner (2000), the median-income voter derives utility from living a life that she perceives as better than those at the bottom. This in turn implies that if the distance between the median-income voter and the poor decreases, the median-income voter's utility drops because her lifestyle is now imitated by up-starts. ...
... This effect of course depends on the distribution of labour market risk, but in instances where risk is not entirely limited to low-income individuals, the result will be a broader base of pro-redistribution support (Rehm et al., 2012). For our purposes, this suggests -just as under Corneo and Grüner's (2000) social rivalry theory -that as the distance between the median voter and the bottom increases (decreases), the median voter will feel that she has more to gain (lose) from redistribution. Regardless of the underlying mechanism, empirical results from Tóth and Keller (2013), who carry out the closest study to our own (albeit with only a subset of the inequality measures we examine), provide support for this interpretation. ...
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This article explores how preferences for redistribution among voters are affected by the structure of inequality. There are strong theoretical reasons to believe that some voter segments matter more than others, not least the so-called median-income voter, but surprisingly little attention has been paid to directly analysing distinct income groups’ redistributive preferences. In addition, while much of the previous literature has focused on broad levels of inequality, as measured by the Gini coefficient, it is likely that individuals respond to different types of inequality in different ways. To rectify this gap, we use data from the European Social Survey and Eurostat to examine the interactive effect of income deciles and various measures of inequality. Results suggest that inequality especially affects the middle-income groups – that is, the assumed median-income voters. Moreover, not all inequality matters equally: it is inequality vis-à-vis those around the 80th percentile that shapes redistributive preferences.
... 4. There are also other theoretical arguments and explanations in the literature for why redistribution levels are relatively low and the poor do not expropriate the rich, including the lower level of political participation of the poor (Harms and Zink 2003), collective action problems of the poor and interest groups (Olson 1965), the deadweight loss from taxation (Meltzer and Richard 1981), the need for a social hierarchy (Corneo and Gr€ uner 2000), the dynamics of perceived social mobility (Piketty 1995), the prospects of upward mobility (Hirschman and Rothschild 1973), campaign contributions (Campante 2011) and competent politicians being more affluent (Mattozzi and Snowberg 2014). The argument put forward in the current paper is also complementary to multidimensional voting frameworks such as Roemer (1998), as one could easy show in an extended model that lower political information could go along with a lower weight put on economic issues and a larger weight given to non-economic issues. ...
Article
No voters cast their votes based on perfect information, but richer voters are on average best informed. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, income is more important in affecting voting behaviour for more informed voters than for less informed voters. Further, when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory.
... This paper contributes to the literature that studies how the source of inequality affects redistribution. Evidence from empirical work using observational data (Corneo and Grüner, 2000;Fong, 2001;Alesina and La Ferrara, 2005) and experimental data (Cappelen et al., 2010(Cappelen et al., , 2013Durante et al., 2014;Mollerstrom et al., 2015;Cappelen et al., 2020;Almås et al., 2020;Andre, 2022; shows that support for redistribution depends on whether inequality is due to differences in luck or effort. We show that the whether luck interacts with effort in the earning process plays an important role in shaping these decisions: People are more willing to support redistribution when luck directly 2 Previous work has shown that Americans tend to be overly optimistic about social mobility, believing that disadvantages early in life can be overcome with sufficient effort (Alesina et al., 2018). ...
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This paper examines how people redistribute income when there is uncertainty about the role luck plays in determining opportunities and outcomes. We introduce a portable experimental method that generates exogenous variation in the probability that real workers' earnings are due to luck, while varying whether luck interacts with effort in the earning process. Then, we elicit redistribution decisions from a U.S.-nationally representative sample who observe worker outcomes and whether luck magnified workers' effort ("lucky opportunities") or determined workers' income directly ("lucky outcomes"). We find that participants redistribute less and are less reactive to changes in the importance of luck in environments with lucky opportunities. We show that individuals rely on a simple heuristic when assessing the impact of unequal opportunities, which leads them to underappreciate the extent to which small differences in opportunities can have a large impact on outcomes. Our findings have implications for models that seek to understand and predict attitudes toward redistribution, while helping to explain the gap between lab evidence on preferences for redistribution and real-world inequality trends.
... Empirical evidence supports conflict perceptions' link to individual social positions via rentseeking, as well as to aggregated inequality via legitimacy struggles. Studying class position and identification in such diverse cases as those of the US and Sweden, Wright (1989) found that class consciousness and conflict perceptions were similarly connected to individual class position: lowerclass members tended to be in favor of conflictual, pro-working class policies, whereas higher-class members preferred less conflictual redistributive compromises (Corneo and Grüner, 2000;Schöneck and Mau, 2015). Additionally, comparative studies have found that the relationship between objective class position and class identification is stronger when incomes are distributed less equally (Andersen and Curtis, 2012), and PSC levels between classes are higher when material inequality is high (Edlund and Lindh, 2015). ...
Article
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Socioeconomic inequality and conflicts regarding distributional issues have resurfaced in many OECD countries over the past three decades. Whereas most research has focused on the objective determinants of perceived social conflicts, we contribute a new facet to this discussion by assessing the relevance of collective stratification beliefs as an independent driver of vertical conflict perceptions. After formulating theoretical positions that give precedence to two factors in explaining the perceptions of social conflicts – objective inequality and the collective stratification belief – we use individual-level data from the 2009 International Social Survey Programme, along with suitable country-level indicators to evaluate both hypotheses. Amid the diverse collective stratification beliefs, we focus on the role of an egalitarian (middle-) class imagery. We are particularly interested in the extent to which such a class imagery can mediate the relationship between socioeconomic inequality and individual conflict perceptions. The results of our multilevel analyses of 27 OECD countries indicate that an egalitarian (middle-) class imagery held by a certain share of a country’s population constitutes a distinct dimension of reality and clearly dominates country-level objective inequality in the explanation of individually perceived social conflicts.
... Other arguments relate to the value of holding a belief that effort ultimately pays off (Benabou and Tirole, 2006), the structure and organization of the family (Todd, 1985), or the perception of whether the income was acquired by luck or effort (Alesina et al., 2004). Finally, one might mention in this context that the desire to obtain a certain social standing has also been related to preferences for redistribution (Corneo and Gruner, 2000). ...
Article
Whether individuals perceive their income as being fair has far-reaching consequences in the labor market and beyond. Yet we know little about the determinants of variation in perceived income justice across individuals. In this paper, we ask to what extent differences in genes are related to variation in individuals' perceived income justice, and whether there is a gene-environment component. Analyzing data from the German TwinLife study, we find that more than 30% of individuals' perceived income justice can be attributed to genes. The rest is mostly related to an idiosyncratic environment.
... The factors highlighted by this research have been pre-tax incomes (Meltzer and Richard, 1981) and prospects of upward mobility (Bénabou and Ok, 2001). Alternative explanations have stressed the role of social status (Corneo and Grüner, 2000), fairness (Alesina and Angeletos, 2005), beliefs about justice (Bénabou and Tirole, 2006), social or group identity (Klor and Shayo, 2010), and beliefs about the civicness of citizens and public officials (Algan et al., 2016). Our contribution is to model novel demand factors, namely political trust, risk aversion and impatience, and to consider tradeoffs among alternative modes of redistribution. ...
Article
We examine whether public spending misallocations may reflect voter demand factors such as political and interpersonal trust or risk and time preferences. A model of voter preferences over public spending tradeoffs provides individual-level testable hypotheses. The data come from an original survey that offered voters in seven Latin American countries binary choices between public spending options in education and security. Respondents with higher mistrust or impatience are more likely to choose transfers over public goods; more impatient respondents are also more likely to choose short-term spending over public investment. Within public goods, however, political mistrust and risk aversion can shift voter demand from current to investment spending. Randomized experiments providing information about the benefits of public investment have the expected average demand impacts, while respondents with high political mistrust or impatience show attenuated treatment effects.
... The data cover a wealth of information ranging from prerequisites for success in society, to attitudes towards equality, etc. Researchers who have studied preferences and subjective values on inequality and redistribution often refer to these data (see, e.g., Brunori, 2017;Corneo & Grüner, 2000;Gimpelson & Treisman, 2018;Kuhn, 2011;Niehues, 2014;Suhrcke, 2001). ...
Article
Despite recent empirical evidence on the importance of perceived inequality, its analysis is still underexplored. In this paper we study whether unobserved perceptions of inequality are reflected in observed individual opinions in a consistent fashion. Inconsistency is relevant to ealuate the level of agreement that individuals share with respect to different domains of inequality. Using the wave from the 2009 International Social Survey Program in the US, we show that inequality is a complicated concept prone to inconsistencies and propose a testing procedure to an empirical appraisal. We find that inconsistencies exist though they may not extend to all the domains of inequality. This inconsistency also emerges by analyzing the relation between unobserved perceptions and political treatment suggesting the hypothesis that inconsistency may be associated with a set of relevant political preferences.
... Attitudes are measured by drawing on questions such as "To what extent do you agree or disagree with the statement, 'It is the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes'?" (e.g., Alesina and La Ferrara 2005;Corneo and Grüner 2000). Responses to questions of this type are typically labeled as preferences (e.g., Alesina and Giuliano 2009;Corneo and Grüner 2002;Guillaud 2013). ...
Article
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Do citizens from former Communist countries exhibit attitudes and preferences with regard to income redistribution that differ from those in the West? This paper seeks to answer this question for reunified Germany. The analysis uses not only survey data on attitudes but also evidence on preferences from a choice task, which forces individuals to consider trade-offs and budget constraints. While we confirm results of prior studies documenting considerable differences in attitudes, we find no differences regarding preferences between East and West Germans. When facing economic restrictions East and West Germans behave the same. ______________________________________________Published in: Journal of Contextual Economics [formerly: Schmollers Jahrbuch]
... A closely related literature considers whether the status concerns that arise from social matching may limit preferences for redistribution. 9 In Corneo and Grüner (2000), middle-class agents may moderate their preferred level of redistribution when consumption provides a signal of their quality in social matches. Inequality may reduce the attractiveness of redistribution relative to social sorting (Levy and Razin, 2015). ...
Article
This paper investigates the political economy of growth when individuals prefer high levels of relative consumption. A pivotal voter determines the equilibrium tax on capital, the revenues from which fund the provision of productive public goods. The taste for status and the distributions of wealth and political power interact to generate stylized versions of oligarchies, middle-class democracies and populist democracies. A rise in the taste for status increases the role of distributional concerns in policy preferences, lowering growth in an oligarchy or populist democracy, but increasing it in a middle-class democracy. In addition, the egalitarian redistribution of wealth or political power causes growth to first rise and then fall as the equilibrium tax rate approaches and then exceeds its growth-maximizing level, generating inverse U-shaped relationships between democracy and growth and inequality and growth.
... More specifically, our paper contributes to the small but growing literature at the intersection between social status and political economy, reconsidering the voting incentives of the rich. 10 In an early contribution, Corneo and Grüner (2000) study voting over redistributive income taxation when relative consumption serves as an instrumental signal for relative wealth finding that status concerns reinforce the reluctance of the rich to redistribute to the poor. This result is driven by taxation reducing the consumption gap between rich and poor, thereby reducing the signaling advantage for the rich. ...
Article
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We analyse the political economy of the public provision of private goods when individuals care about their social status. Status concerns motivate richer individuals to vote for the public provision of goods they themselves buy in markets: a higher provision level attracts more individuals to the public sector, enhancing the social exclusivity of market purchases. Majority voting may lead to a public provision that only a minority of citizens use. Users in the public sector may enjoy better provision than users in the private system. We characterise the coalitions that can prevail in a political equilibrium.
... Conversely, in societies where mobility is perceived to be low, the median voter theorem will rule and the poorer would vote for more redistribution. 6 Additionally, Corneo and Grüner (2000) highlight the role of social incentives. Even if the middle-class households may benefit from larger redistribution, the fear of losing social status in favour of the poor may align them to the conservatives. ...
... Prior studies have identified a list of factors associated with preference for redistribution, which include income (Hasenfeld & Rafferty, 1989;Ravallion & Lokshin, 2000;Bernasconi, 2006), risk and insurance (Iversen &Soskice, 2001;Cusack, Iversen & Rehm, 2006;Rehm, 2009), borrowing constraints (Harms & Zink, 2003), personal life events (Piketty, 1995;Giuliano & Spilimbergo, 2008), culture (Luttmer & Singhal, 2011), national history (Alesina & Glaeser, 2006), indoctrination of Communism ideology (Alesina & Fuchs-Schundeln, 2007), individual left-or right-wing ideological values (Bernasconi, 2006), family structure (Todd, 1985;Esping-Andersen, 1999;Alesina & Giuliano, 2010), perceptions of fairness (Galasso, 2003;Alesina & Angeletos, 2005;Alesina & Glaeser, 2006), prospects of upward mobility (Benabou & Ok, 2001;Ravallion & Lokshin, 2000;Cojocaru, 2014), ethnic identity (Lindqvist & Östling, 2013) or ethno-linguistic fractionalization (Sturm & De Haan, 2015), social capital (Yamamura, 2012), immigration (Mayr, 2007Senik, Stichnoth, & Van der Straeten, 2009;Magni-Berton, 2014), and the desire to be in accordance with public values or to obtain high social standing (Corneo & Gruner, 2000, 2002. ...
... Several elements, nonetheless, push in the opposite direction, making even the poor less prone to redistributive measures: social mobility (Piketty, 1995;Bénabou and Ok, 2001;Alesina and La Ferrara, 2005), status considerations in the low-middle class (Grüner and Corneo, 2000), or realising about the efficiency costs in redistribution (Cremer et al., 1996). Opposition to progressive taxation can therefore be found not only among the well-off. ...
... Los trabajos empíricos no alcanzan conclusiones unánimes (Gradstein y Milanovic, 2004;Albertus y Menaldo, 2014;Aidt y Jensen, 2009b). Un enriquecimiento de la literatura pasaría por considerar limitaciones en la igualdad de la representación política de los ciudadanos (Acemoglu y Robinson, 2008;Ardanaz y Scartascini, 2013), o la consideración de las actitudes sobre fiscalidad, que se suelen dar por sentadas respecto a la búsqueda del interés propio inmediato, cuando la realidad parece ser bastante más compleja (Harms y Zink, 2003;Grüner y Corneo, 2000;Giuliano y Spilimbergo, 2009). Las preferencias aparecen limitadas por el nivel de conocimiento sobre la realidad social (Cruces, Perez-Truglia, y Tetaz, 2013;Bartels, 2005) o la confianza en el gobierno (Kuziemko, Norton, Saez, y Stantcheva, 2013;Svallfors, 2013). ...
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... Also, the influence of special interest lobby groups (as in Becker, 1983, Austin-Smith, 1987and Grossman and Helpman, 2001 or the role of social status (see Corneo and Gruner, 2000) may prevent redistribution. Finally, the social mobility of voters may affect preferences for redistribution. ...
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After‐tax income inequality has risen since the mid‐1990′s, as increases in market income inequality have not been offset by greater fiscal redistribution. This paper argues that the substantial increase in consumer goods diversity has mitigated mounting political pressures for redistribution. Within a probabilistic voting framework, we demonstrate that if the share of diversified goods in the consumption bundle increases sufficiently with income, then an increase in goods diversity can reduce the political equilibrium tax rate. Focusing on OECD countries, we find empirical support for both the model's micro‐political foundations and the implied relation between goods diversity and fiscal policy outcomes. This article is protected by copyright. All rights reserved.
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Chapter
In diesem Kapitel wollen wir zunächst anhand zweier einfacher Medianwählermodelle einige Grundprinzipien der Bestimmung von Steuern und Staatsausgaben in einer Demokratie erläutern. Dabei werden wir zwei alternative Verwendungsmöglichkeiten der Einnahmen berücksichtigen: den Kauf öffentlicher Güter und die Einkommensumverteilung. Die folgenden zwei Abschnitte beschäftigen sich mit der Höhe der staatlichen Defizite. Abschnitt 3 gibt einen kurzen Überblick über die konkurrierenden normativen Ansichten zu Staatsdefiziten. In Abschnitt 4 werden wir die Annahme eines ausgeglichenen Staatshaushaltes aufgeben und die Bestimmungsgründe der Höhe des Staatsdefizits in polit-ökonomischen Modellen untersuchen. Abschnitt 5 geht schließlich auf ein spezielles Problem bei der Besteuerung ein, das sogenannte Zeitinkonsistenzproblem. Es tritt auf, wenn die Regierung Schwierigkeiten hat, glaubhaft zu machen, dass die Aktivitäten der Bürger in Zukunft nicht stärker besteuert werden. Schließlich werden wir in Abschnitt 6 ausführlich die Grenzen politischer Umverteilung untersuchen.
Chapter
In Kapitel 3 des Buches werden die in der Finanzwissenschaft gängigen Rechtfertigungsargumente der Besteuerung ebenso wie die herkömmliche ökonomische Steuerwirkungslehre einer kritischen Betrachtung unterzogen. Dabei kann nicht nur gezeigt werden, dass die traditionelle Begründung von Steuern und sonstigen Abgaben mittels Leistungsfähigkeits- und Äquivalenzprinzip einer Erweiterung um verhaltensökonomische Einsichten bedarf. Zudem wird verdeutlicht, dass die gängige effizienz-, verteilungs- und stabilitätsbezogene Wirkungsanalyse der Besteuerung ohne eine zusätzliche verhaltensökonomische Fundierung rasch an Grenzen stößt. Letzteres gilt auch und insbesondere für die Analyse des Phänomens der Steuerhinterziehung, das mittels traditioneller ökonomischer Ansätze nur unzureichend erklärt werden kann und sich daher zu einem Kernbereich der Steuerpsychologie entwickelt hat. Mit dem sich anschließenden Exkurs zum staatlichen Verschuldungsverhalten wird zudem verdeutlicht, dass sich verhaltensökonomische Einsichten nicht bereits in einer „Psychologie der Besteuerung“ erschöpfen, sondern vielmehr für die Gesamtheit der staatlichen Einnahmen fruchtbar gemacht werden können.
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The links between ethnic diversity, attitudes towards immigrants, and support for redistribution are investigated in order to make predictions about natives' demand for redistribution and establish how this preference is affected by interethnic contact, perceived outgroup threats, and natives' social distance from immigrants. The econometric specification explicitly and simultaneously considers the impact of ethnic heterogeneity on attitudes towards immigrants and of those attitudes on the preference for redistribution. Application of bivariate recursive probit estimations enables the decomposition of marginal effects into direct and indirect effects. The empirical assessment, based on a cross section of 18 European countries from 2014, shows that natives' perception of outgroup threats directly decreases their support for redistribution, whereas interethnic contact leads to a decrease in anti-immigrant attitudes which indirectly increases the preference for redistribution. If immigrants are perceived as a threat to the culture or way of life in a country, a native's probability of supporting more governmental redistribution decreases by 6.4 percent or 8.2 percent, respectively. However, if ethnic heterogeneity rises, this probability increases by 0.8 percent. In contrast, natives' social distance from immigrants does not significantly affect the former's preference for redistribution. These results are robust to IV estimation strategies which control for reverse causality and for the possibility of natives' selective out-migration. Consideration of the natives' and immigrants' average incomes shows that a large ethnic income gap between natives and immigrants strengthens the negative impact of perceived outgroup threats on redistribution preference.
Article
In this paper we study the role of inequality in a model of repeated social competition where endowments (the resources used in the competition) and rewards (the resources obtained as prizes) are connected because the rewards of today’s competition determine the endowments of tomorrow’s competition. We find that the harshness of social competition is maximal for an intermediate level of inequality, and that increasing or decreasing inequality beyond that level monotonically mitigates social competition, up to completely eliminating it at the extremes. If social competition is wasteful, utilitarian welfare is maximized in case of equality. A greater uncertainty about the connection between today’s rewards and tomorrow’s endowments mitigates social competition. Finally, there emerge concerns for others’ resources that are downward and not upward, with the value of high social standing which changes non-monotonically in the resources of those with lower standing.
Article
Previous studies have shown that Chinese citizens are overall optimistic about their economic opportunities and tolerate the high levels of inequality in their society. This paper conducts a random survey experiment in China to examine whether the established views on fairness and inequality change after the respondents receive the general information on national wealth concentration or the customized information on one's household income ranking. We find that either type of information leads respondents to view society as less fair than they had initially believed. The information on the wealth concentration also increases public concern about social inequality. Neither information leads the respondents to think that government should play a more significant role in reducing inequality. A lower level of trust in the local government induced by the two types of information may partially explain this lack of demand for government intervention. From a policy perspective, the findings of this paper suggest that with the potential impact of information about income distribution that exists, inequality and fairness concerns are issues that China will need to address.
Article
In this paper I present a model in which an increase in income inequality can lead to a decrease in voters’ demand for redistribution. In my model, people sort into groups according to income and as a result they become biased about the shape of the income distribution. I demonstrate that an increase in inequality can lead to a decrease in perceived inequality in the presence of segregation, and hence to a fall in people’s support for redistribution.
Article
There are continued debates on whether social pensions should be universal or targeted. This paper investigates this issue from the perspectives of Thai older persons regarding the old-age allowance system. The paper uses data from the 2016 Population Change and Well-being in the Context of Aging Society Project with the final sample of 6,040 individuals aged 60 and older. The study employs probit regression analysis, where the dependent variable is whether the respondent thinks that the old-age allowance should be universal or targeted. Independent variables include individual, household, social, and economic characteristics. The paper finds that those with high or low education and those with high or low economic well-being tend to prefer the targeted system compared to the middle group. Family status, individual values, and social norms also influence the preferences. The two main mechanisms explaining the preferences of older persons are self-interest and altruism. The findings suggest that the old-age allowance system should continue to provide basic income security for all older persons. Separate poverty relief programs can be implemented to support individuals in need.
Thesis
There has been a general view among British historians that popular opposition to tax increased dramatically in the 1970s. However, no study has looked in detail at the available evidence. This view has been based largely on politicians’ statements and a few isolated studies from the 1980s, most of which did not focus on Britain specifically. This thesis attempts to construct a more detailed picture of the development of popular attitudes to tax in Britain c1945 to 1992. To do this it first examines the available quantitative evidence, variable and unreliable as much of it is before the 1980s and draws some cautious conclusions about how this suggests popular attitudes to tax developed. The following chapters look at discussions in the major national newspapers and political magazines, two main political parties, the civil service, Trades Union Congress, and Federation of British Industries, later Confederation of British Industry, in a series of case studies. These focus on moments when tax was a particularly high-profile issue: the 1949 budget and 1950 election; the 1959 election and 1961 budget; the 1964 election and 1965 budget, the late 1960s and 1970 election; the late 1970s and 1979 election; and the 1987 and 1992 elections. The findings do not indicate that opposition increased significantly in the 1970s. On the contrary, the quantitative evidence suggests that popular opposition to taxation was consistently at a relatively low level throughout the period studied, potentially even decreasing through the 1980s, when the evidence is more methodologically reliable. Similarly, although there is evidence that some Labour politicians, in particular, were slightly more concerned about opposition to tax from the 1970s onwards, they were also convinced of opposition in the 1940s and 1950s, supposedly the high point of popular support for high taxation. Even in 1992, the evidence indicates that most Labour politicians remained convinced that perceptions of fairness in taxation were crucial and that support for public spending was also extensive. The views expressed by Labour and Conservative politicians’ during the 1980s indicate that they did not think at that time that popular opposition to tax had increased unprecedentedly in the 1970s. Instead, that idea first appeared in the press in 1987, becoming pervasive by 1992. Among the various organisations studied here, the research therefore indicates that this idea of opposition to tax increasing in the 1970s was found initially only among journalists in the late 1980s and early 1990s – and that it was circulated without supporting evidence.
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Empirical evidence for the U.S. suggests that illicit consumption of opioids increases in association with socio-economic deprivation of the middle-class. To explore the underlying mechanisms, we set up a task-based labor market model with endogenous mental health status and a health care system. The decline of tasks that were historically performed by the middle class and the associated decline in socio-economic status increases the share of mentally distressed middle class workers. Mentally distressed workers can mitigate their hardships by the intake of illicit drugs or by consuming health goods. We argue that explaining the rise in illicit drug use among the U.S. middle class requires an interaction of socio-economic decline and falling opioid prices, i.e. one factor in isolation is insufficient. Our analysis also points to a central role of the health care system. Extending mental health care could motivate the mentally distressed to abstain from illicit drug consumption.
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THE DETERMINANTS OF PREFERENCES FOR REDISTRIBUTION Savaş Çevik – Erol Turan EXTENDED ABSTRACT Introduction One of the most important functions of modern states is to redistribute income through tax and spending systems to ensure relative justice in the distribution of income among members of society. Even if there is no conscious policy to improve the income distribution, even the usual tax collection and spending activities of the state have potential redistributive consequences. This function of states is as much a matter of debate as is common. To what extent the redistribution would be good or the desirability that the state undertakes such a function is a matter of controversy among politicians as well as economists. Further to that debate, the differences between countries in the redistributive policies implemented by them and the redistributive results of state activities in general are also needed to explain. Considering that the existing practices are formed - at least partly- by the citizens’ preferences in democratic administrations, it has been an important research topic among economics and political scientists in recent years that how preferences of individuals about the level of redistribution are determined and what determines these preferences. So, the aim of the study is to examine the factors shaping the redistribution preferences at the individual level. Method The data used in the study were obtained from the combination of data sets collected under the World Values Survey (WVS) and the European Values Survey (EVS). More and more countries are targeted through combination to reach a large sampling. Both surveys have been conducted in a number of countries from 1981 to today (From the first wave, both surveys were applied cumulatively in 113 countries / regions representing 90% of the world population). They are applied to examine the values, beliefs, political, social and economic attitudes of individuals and the change in them through samples representing the country. Most recently, the sixth wave of WVS (2010-2014) and the 4th wave of EVS (2008-2010) have been implemented. When the two data sets were combined, a total of 7 waves were obtained. In the analysis of the data, estimates were made according to two econometric methods. For simplicity, least squares regressions (OLS) were used. The results are largely consistent with each other. Tables report results from both estimates. In all predicted equations, country and wave fixed effects are included to control the impacts of the country and the EVS / WVS wave. In addition, robust standard errors were used in OLS estimations to more accurately measure significance. First, the basic demographic variables and the effect of income are analyzed as the forecast strategy. The effect of individual values and norms were then included in the basic model predicted in this way. Finally, the effect of variables on social identities and ideology has been tested. In the design of the models, high-correlation variables were avoided as much as possible in the same model. Findings Analysis of the effects of demographic variables and income are presented in tables. Age is statistically significant in most of the equations. As the age increases, the redistribution rate increases, albeit with small coefficients. In other equations, the birth year was used to evaluate the effect of the birth cohort and was found to have a negative effect. Accordingly, newer generations favor less redistribution compared to the old ones. In parallel with other studies, being a woman is a positive and important variable in all equations. Women clearly have a higher preference for redistribution. Again, being married according to expectations shows a lower redistribution bias compared to the other two categories. Divorced / widows / separated men and women, and singles are more in favor of redistribution than married ones. In the first four equations, the income was evaluated by the absolute level and it was found to have a negative coefficient. In the other four equations, in order to evaluate the effect of the relative income position of the individual, the difference of his/her income from the median income was evaluated, and it was found to be similarly effective and significant. While unemployed people favored higher income distribution, those who are self-employed showed less redistribution preference than expected, in connection with the possible risk preferences. The coefficients for both variables are significant. Conclusions and Discussion The study aimed to provide a detailed review of the determinants of the redistribution preferences in light of the theoretical and empirical literature and the data from the WVS / EVS. The findings of the study were largely in line with the hypotheses and findings of other studies. The results show that demographic variables such as age, marital status, gender are effective on re-distribution preferences. The birth cohort, which represents similar shock and change experiences outside of age, is also a significant variable. Income is associated with less redistribution, both in terms of its absolute level and as a difference from the median income. In order to test the POUM hypothesis, the difference between the level of education and the level of education of the father have a negative effect on the preference for redistribution in line with the predictions of the hypothesis. “Being self-employed, which can be seen as a reflection of the risk preferences of individuals, is again tied with less redistribution preference. One of the most important variables is the opinions about the cause of poverty. Indirectly, the coefficients of this variable, which can be seen as an indicator of attitudes about whether the beneficiaries of the redistribution will deserve, are important and significant. Accordingly, those who see the cause of poverty as a natural consequence of laziness and modern developments are less in favor of redistribution than those who see it as unluckiness and injustice in society. Besides, life control perception (fatalism), reciprocity motivation, altruism and trust were found as individual values and norms in terms of determining the preference for redistribution. Those who express themselves as rightist in the political spectrum are less in favor of redistribution than those who are leftists. An interesting finding of the study is that the religious categories to which the individuals belong are effective both in influencing social identities and individual values, and in the re-distribution preferences in order to see insurance function. According to this, all religious categories are more favorable to income inequalities than those who do not belong to any religion. The interaction between religion and religiousness also yielded significant results. The study found that social identities are important, in this sense, subjective social class belonging and national pride affect the preferences of redistribution. A negative coefficient was found regarding the national pride variable. This nationalism can be explained by more individual sacrifice and activity bias and reluctance to share with others “in ethnically heterogeneous or high-migrant countries. The issue can be further investigated with a study that takes into account the ethnicity of countries.
Article
What explains the popularity of right-wing parties among the poor? This article argues that in hierarchical societies with high social-status inequality, cross-class coalitions can emerge among high-status voters if they believe their social status is under threat. I demonstrate this in the context of the Indian states by exploiting an announcement by the Government of India in 1990 to implement affirmative action for lower castes—an intervention that threatened to weaken the social status of upper caste Brahmans. Using unique data from the 1931 census, this article shows that areas where Brahmans were more dominant in the 1930s experienced a higher surge in right-wing voting after this announcement than other areas. Using survey data, I find that both wealthy and poor Brahmans voted for the right wing where Brahmans were dominant in 1931. The article shows how concerns about social status may make the poor open to appeals by antiredistribution parties.
Chapter
In this chapter, we present both macro-empirical and micro-experimental evidence of how subjects redistribute resources. We identify a moderate level of redistribution both in macro-empirical and experimental work. We present evidence that moderate levels of redistribution are due to the preferences of individuals rather than other possible explanations, such as the interests of elites or institutions. Particularly, we find that moderate redistribution, which transfers resources based on the fairness principle of need-based justice is generally accepted and brings along productivity-enhancing effects instead of efficiency losses.
Article
We investigate how social status concerns may affect voters’ preferences for redistribution. Social status is given by a voter’s relative standing in two dimensions: consumption and social class. By affecting the distribution of consumption levels, redistribution modifies the weights attached to the two dimensions. Thus, redistribution not only transfers resources from the rich to the poor, but it also amplifies or reduces the importance of social class differences. Social status concerns can simultaneously lead some members of the working class to oppose redistribution and some members of the socioeconomic elites to favor it. They also give rise to interclass coalitions of voters that, despite having different monetary interests, support the same tax rate. We characterize these coalitions and discuss the resulting political equilibrium.
Article
How does the incentive to engage in social signaling depend on the composition of peers? We find that an increase in the mean peer quality may either strengthen signaling incentives (keeping up with the Joneses) or weaken them (small fish in a big pond). Both right and left truncations of the distribution of peer quality reduce signaling incentives, while more dispersed peer distributions strengthen them. Finally, more right skewed peer distributions strengthen signaling incentives when only a small fraction of the group engage in signaling, but weaken them when signaling is widespread.
Chapter
Social justice has thus far involved government through taxation and redistribution of income. In this chapter we consider social justice without taxation and income redistribution through government. Social justice defined as equality of opportunity can provide result in social mobility. We ask whether altruism and charity can be relied upon to provide income for people in need and we relate charitable giving to social status. We view charitable giving as public good: the benefit is to others who to see that people are helped, as well as to the beneficiaries of charitable giving. We see how charitable inclinations can unfortunately be exploited. We ask whether people regard public assistance as a substitute for their own personal charitable giving. Experimental evidence on norms of fairness is reviewed, which takes us into the domain of behavioral economics. Social justice without government includes global social justice, which is in principle sought through development aid. Contents: (1) Social mobility; (2) Altruism and charity; (3) Social status and charitable giving; (4) Charity as a public good; (5) The exploitation of charitable feelings; (6) Private charity and public assistance; (7) Experimental evidence on norms of fairness; (8) Global social justice; (9) Summary; (10) References; (11) Questions for discussion
Chapter
In Kap. 4 des Buches werden die in der Finanzwissenschaft gängigen Begründungen der Entwicklung der Staatsausgaben im Zeitverlauf ebenso wie die herkömmliche ökonomische Wirkungsanalyse der öffentlichen Ausgaben einer verhaltensökonomischen Betrachtung unterzogen. Dabei kann nicht nur dargelegt werden, dass bereits die bestehenden finanzwissenschaftlichen Erklärungsansätze zum Staatsanteilswachstum in vielfältiger Form auf psychologische Erkenntnisse zurückgreifen. Zudem wird gezeigt, wie perzipierte Vorteile, Dringlichkeitseinschätzungen und Fairnesserwägungen die subjektive Wahrnehmung der Staatsausgaben aus Sicht der Nutznießer öffentlicher Leistungen beeinflussen. Schließlich wird ebenso verdeutlicht, dass die gängige effizienz-, verteilungs- und stabilitätsbezogene Wirkungsanalyse der Ausgabentätigkeit ohne eine zusätzliche verhaltensökonomische Fundierung unvollständig bleibt. Letzteres gilt auch für die Analyse des (haushalts-)politischen Willensbildungsprozesses, der nur unzureichend durch bestehende politökonomische Ansätze erklärt werden kann und daher um eine Betrachtung der psychologischen Bestimmungsfaktoren politischen Verhaltens in der Demokratie – und hier insbesondere des Wählerverhaltens – ergänzt werden muss.
Thesis
In recent decades the international migration has increased worldwide. The influx of people from different cultures and ethnic groups poses new challenges to the labor market and the welfare state of the host countries and causes changes in the social fabric. In general, immigration benefits the economy of the host country. However, these gains from immigration are unevenly distributed among the native population. Natives who are in direct competition with the new workers expect wage losses and a higher probability of getting unemployed, whereas remaining natives foresee either no feedback effects or even wage gains. On the other hand, the tax and transfer system benefits disproportionally from an influx of highly skilled immigrants. Examinations of 20 European countries in 2010 show that a higher proportion of low-skilled immigrants in the immediate neighborhood of the natives increases the difference in the demand for redistribution between high-skilled and low-skilled natives. Thus, high-skilled natives are more opposed to an expansion of the governmental redistribution. On the one hand, a higher proportion of low-skilled immigrants generates a higher fiscal burden on the welfare state. On the other hand, high-skilled natives' wages increase due to an influx of low-skilled immigrants, since relative supply of high-skilled labor increases. In addition to the economic impact of immigration, the inflow of new citizens is accompanied by natives' fear of changes in the social environment as well as in symbolic values, such as cultural identity or natives' set of values. The latter might generate negative attitudes towards immigrants and increase the demand for a more restrictive immigration policy. On the other hand, more interethnic contact due to a higher ethnic diversity could reduce natives' information gaps, prejudices and stereotypes. This, in turn, could enhance more tolerance and solidarity towards immigrants among natives. Examinations of 18 European countries in 2014 show that more interethnic contact during everyday life reduces both the natives' social distance from immigrants and their fear of social upheaval by the presence of immigrants. However, natives' social distance from immigrants has no effect on their preference for redistribution, but their perceived threat to the national culture and social life by the presence of immigrants has a significantly negative impact on their demand for redistribution. Thus, natives’ concern about the preservation of symbolic norms and values affects the solidarity channel of their redistribution preference. An individual's upward mobility over time or in relation to his or her parents determines his or her attitude towards the welfare state as well as the transfer of his or her opinions to his or her own children. With regard to intergenerational income mobility, Germany shows a value in the international midfield; higher than the United States (lower mobility) and lower than the Scandinavian countries (higher mobility). For example, if a father's lifetime income increases by 10 percent, his son's lifetime income increases by 4.9 percent in the United States and by 3.1 percent in Germany. Additionally, in Germany, fathers' lifetime income tends to show a higher impact on their sons' income if their incomes are higher. In the United States, fathers' lifetime incomes have a stronger influence on their sons' income at the lower and the upper end of the income distribution compared to the middle. Taking a closer look at the intragenerational wage mobility and wage inequality in Germany, the development at the current edge is rather sobering. Since 2000 there is a steady decline in wage mobility. Furthermore, wage mobility in the services sector has been significantly lower than in the manufacturing sector since the beginning of the 2000s. This result is mainly driven by the decrease of wage mobility in the health care and social services sector. Moreover, a worker's unemployment spells and occupation have become more important in the meantime. Since 2006 the increase in the German wage inequality has markedly slowed down and wage growth between 2006 and 2013 has been even polarized, i.e. wages at the lower and at the upper end of the wage distribution have increased more than wages in the middle. However, this development can be partly attributed to the computerization and automation of the production processes. Although, there was substitution of manual routine tasks between 2001 and 2013, cognitive routine tasks are still more pronounced in the middle and at the upper end of the wage distribution. Furthermore, the latter experienced an increase in wage mobility since 2000. On the other hand, manual non-routine tasks are localized disproportionally in the middle and at the lower end of the wage distribution. Thus, the wage gains of these occupations at the lower end were compensated for by the wage losses in the middle.
Chapter
Die Verteilung von Einkommen und Vermögen in den heutigen Demokratien ist weit von einer Gleichverteilung entfernt. Wenige verdienen und besitzen viel, und dementsprechend partizipieren die Meisten weit unterproportional am Reichtum der Gesellschaft. Dieses generelle Muster ist recht stabil und weist für alle Länder über alle Zeiten eine entsprechend linkssteile Form der Häufigkeitsverteilung von Einkommen oder Vermögen auf. Während die Verteilung über den größten Zeitraum des 20. Jahrhunderts gleichmäßiger geworden war, driftet sie seit den 80er Jahren in vielen Industrieländern wieder auseinander, wie der Beitrag von Atkinson (2000) dies bereits im Titel zum Ausdruck bringt. Dies mag dazu beitragen, daß Verteilungsfragen wieder ein wenig „interessanter“ geworden sind, wenngleich damit noch nicht unbedingt relevanter im politischen Bereich (vgl. Atkinson 1997).
Article
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The authors examine conditions under which 'Veblen effects' arise from the desire to achieve social status by signaling wealth through conspicuous consumption. While Veblen effects cannot ordinarily arise when preferences satisfy a 'single-crossing property,' they may emerge when this property fails. In that case, 'budget' brands are priced at marginal cost, while 'luxury' brands, though not intrinsically superior, are sold at higher prices to consumers seeking to advertise wealth. Luxury brands earn strictly positive profits under conditions that would, with standard formulations of preferences, yield marginal-cost pricing. The authors explore factors that induce Veblen effects and they investigate policy implications. Copyright 1996 by American Economic Association.
Article
We consider a political economy with two partisan parties; each party represents a given constituency of voters. If one party (Labour) represents poor voters and the other (Christian Democrats) rich voters, if a redistributive tax policy is the only issue, and if there are no incentive considerations, then in equilibrium the party representing the poor will propose a tax rate of unity. If, however, there are two issues – tax policy and religion, for instance – then this is not generally the case. The analysis shows that, if a simple condition on the distribution of voter preferences holds, then, as the salience of the non-economic issue increases, the tax rate proposed by Labour in equilibrium will fall – possibly even to zero – even though a majority of the population may have an ideal tax rate of unity.
Article
In many voting situations, preferences over options may fail to be single-peaked. This is especially true when options consist of different amounts of a good which is provided through distortionary taxation. In this paper, voting over linear income tax schedules is considered. Although preferences may fail to be single-peaked, a choice set is shown to exist when only mild restrictions are imposed. For many choices in the public domain, the conditions required for this result are likely to be satisfied.
Article
The ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake. In this paper, the authors look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system. They ask how much redistribution occurs when only local government can have tax/transfer instruments, individuals can move freely among jurisdictions, and voters in each jurisdiction are fully aware of the migration effects of redistributive policies. Local redistribution is shown to induce sorting of the population. Copyright 1991 by University of Chicago Press.
Article
This paper presents a theory of competition among pressure groups for political influence. Political equilibrium depends on the efficiency of each group in producing pressure, the effect of additional pressure on their influence, the number of persons in different groups, and the deadweight cost of taxes and subsidies. An increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers. This analysis unifies the view that governments correct market failures with the view that they favor the politically powerful: both are produced by the competition for political favors.
Article
Just like economists, voters have conflicting views about redistributive taxation because they estimate its incentive costs differently. We model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs. In the long run 'left-wing dynasties' believing less in individual effort and voting for more redistribution coexist with 'right-wing dynasties.' This allows us to explain why individual mobility experience and not only current income matters for political attitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Article
This paper investigates the relationship between income distribution, democratic institutions, and growth. It does so by addressing three main issues: the properties and reliability of the income distribution data, the robustness of the reduced form relationship between income distribution and growth estimated so far, and the specific channels through which income distribution affects growth. The main conclusion in this regard is that there is strong empirical support for two types of explanations, linking income distribution to sociopolitical instability and to the education/fertility decision. A third channel, based on the interplay of borrowing constraints and investment in human capital, also seems to receive some support by the data, although it is probably the hardest to test with the existing data. By contrast, there appears to be less empirical support for explanations based on the effects of income distribution on fiscal policy. Copyright 1996 by Kluwer Academic Publishers
Article
A model of social distance is presented that is useful for understanding social decisions. An example is constructed of class stability. Agents who are initially close interact strongly while those who are socially distant have little interaction. In this example, inherited social position, which may be interpreted as social class, plays a dominant role. The relevance of this model to social decisions, such as the choice of educational attainment and childbearing, is discussed in the context of specific ethnographic examples. Class position may play a dominant role in these decisions.
Social Norms, Saving Behavior, and Growth
  • Haroldl Cole
  • Mailath
  • Georgej
  • Andpostlewaite
Cole,HaroldL.;Mailath,GeorgeJ.andPostlewaite, Andrew. “Social Norms, Saving Behavior, and Growth.” Journal of Political Economy, De-cember 1992, 100(6), pp. 1092–125
Conspic-uous Consumption, Snobbism and Conform-ism
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Corneo, Giacomo and Jeanne, Olivier. “Conspic-uous Consumption, Snobbism and Conform-ism.” Journal of Public Economics, October 1997, 66(1), pp. 55–71
AnExplorationintheTheoryof Optimal Income Taxation
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Mirrlees, James A. “AnExplorationintheTheoryof Optimal Income Taxation.” Review of Economic Studies, April 1971, 38(114), pp. 175–208
WhythePoorDoNotExpropriate the Rich in Democracies: An Old Argument in New Garb
  • Roemer
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Roemer, John E.“WhythePoorDoNotExpropriate the Rich in Democracies: An Old Argument in New Garb.” Journal of Public Economics, Feb-ruary 1995, 70(3), pp. 399–424
Occupational prestige ratings from the 1989 general social survey
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National Opinion Research Center. Occupational prestige ratings from the 1989 general social survey. Ann Arbor, MI: Inter-university Consortium for Political and Social Research (ICPSR 9593), December 1991.
Elections: The Expression of the Democratic Class Struggle
  • Seymour M Lipset
Lipset, Seymour M. " Elections: The Expression of the Democratic Class Struggle, " in R. Bendix and S. M. Lipset, eds., Class, status, and power. London: Routledge & Kegan Paul, 1967, pp. 413–28.