Inequality and the demand for redistribution: Six essays on the causes and consequences of policy preferences

Abstract

This cumulative dissertation analyzes public opinion on policies that redistribute income: progressive taxes and targeted social transfers. It primarily explains why individuals and countries support more or less redistribution. The fundamental expectation is that people are driven by two motives: to expand and maintain their disposable income (“self-interest”) and to ensure a fair distribution of income (“fairness”). Those with less (more) income, those who expect to lose (gain) income, and those who find the current income distribution unfair (fair) should demand more (less) redistribution. While these theories are drawn from previous research, I revise common theoretical approaches to arrive at a deeper understanding of public opinion. Firstly, people’s ability to pursue their economic self-interest is inhibited by cognitive limits. Those with less income (expectations) only increase their support for redistribution when they know and think about expectable financial benefits, which is often not the case. In accordance with this theory, the dissertation presents quantitative evidence suggesting that those who gain income over time reduce their demand for redistribution but those who lose income do not increase it. Moreover, those who experience more economic risk of substantial income drops are not found to increase their demand for redistribution. In contrast, the implications of employment are fully in line with rationalist expectations: those who become unemployed demand more redistribution while those who re-gain employment reduce their demand again. Secondly, this dissertation advances the understanding of how unfairness perceptions and resulting redistribution demand arise. It uses equity theory to argue that people consider the income distribution to be unfair when there is inequality between workers with similar skills and efforts, which I coin unfair inequality. Quantitative analyses show that redistribution demand is not only higher among those who believe that unfair inequality is higher; there is also more support of redistribution in countries where objectively realized inequality between workers with similar skills and efforts (i.e., unfair inequality) is higher. This shows that unfairness beliefs are not idiosyncratic traits but are grounded in reality. The dissertation further shows that self-interest and unfairness perceptions are not equally strong drivers of preferences across countries. People only turn their aversion to inequality (be it due to self-interest or a desire for fairness) into demand for public redistribution when redistribution can be implemented fairly and effectively. This is the case when the government wields an effective bureaucracy and is free of corruption and nepotism, i.e., when it has high-quality institutions. Quantitative evidence offers strong support for these expectations. Income and unfairness perceptions are only strong predictors of differences in public support of redistribution when the quality of government of a country is sufficiently high. In a last step, the dissertation also analyzes the consequences of public support of redistribution. It argues that public opinion influences voting behavior (via issue-voting) and policymaking (via office- and policy-seeking politicians). Zooming in on a popular expectation subsumed under these arguments, the dissertation analyzes whether parties that governed are retrospectively punished and rewarded for implementing changes to the welfare state. It is typically assumed that parties will be punished (rewarded) for implementing welfare policies that oppose (are in line) with the policy preferences of their voters. Quantitative evidence suggests that this is not the case, not even under favorable circumstances such as a left government party. That notwithstanding, previous research suggests that prospective issue-voting does matter, where voters chose parties on the ballot paper that promise to act in accordance with their redistribution preferences.