Why does the amount of income redistribution differ between the United States and Europe? The Janus face of Switzerland
Abstract. In this paper, the amount of income redistribution in the United States, the European Union, and in Switzerland is compared and empirically related to economic, political, and behavioral determinants elaborated in the literature. Lying in between the two poles, data on Switzerland provides evidence about the relative merits of competing hypotheses. It tips the balance against the economic explanation, which predicts more rather than less income redistribution in the United States compared to the EU in general. It only weakly supports the political model linking proportional representation and multiparty structure (which also characterize Switzerland) to redistribution; yet the Swiss share of transfers in the GDP is low. Behavioral explanations receive a good deal of support from the case of Switzerland, two countries that share with the United States the belief that hard work rather than luck, birth, connections, and corruption determine wealth. In this way, the Janus faces of Switzerland may help to explain the difference in the amount of U.S. and EU income redistribution.
Keywords. Income redistribution, Income mobility, Openness, Proportional representation, Beliefs, Religiosity.JEL. D31, D63, H53, I31.
Adsera, A. & Boix, C. (2002). Trade, democracy, and the size of the public sector: The political underpinnings of openness. International Organization 56(2), 229–262. doi. 10.1162/002081802320005478
Alesina, A. & Angeletos, G.-M. (2005). Fairness and redistribution. The American Economic Review 95(4), 960–980. doi. 10.1257/0002828054825655
Alesina, A., Baqir, R., & Easterly, W. (1999). Public goods and ethnic divisions. Quarterly Journal of Economics 114(4), 1243–1284. doi. 10.1162/003355399556269
Alesina, A. & Giuliano, P. (2009). Preferences for Redistribution. NBER Working Paper, No.14825. doi. 10.3386/w14825
Alesina, A. & Glaeser, E. (2004). Fighting Poverty in the US and Europe: A World of Difference. Oxford University Press.
Alesina, A., Glaeser, E., & Sacerdote, B. (2001). Why doesn’t the United States have a European-style welfare state? Brooking Papers on Economic Activity 2, 187–277.
Alesina, A. & La Ferrara, E. (2005). Preferences for redistribution in the land of opportunities. Journal of Public Economics 89(5-6), 897–931. 10.1016/j.jpubeco.2004.05.009
Balcells Ventura, L. (2006). Trade openness and preferences for redistribution: A cross-national assessment of the compensation hypothesis. Business and Politics 8(2), 1–50. doi. 10.2202/1469-3569.1131
Barenboim, I., & Karabarbounis, L. (2008). One dollar, one vote. The Economic Journal, 121(553), 621-651. 10.1111/j.1468-0297.2010.02406.x
Benabou, R. & Ok, E. (2001). Social mobility and the demand for redistribution: the POUM hypothesis. Quarterly Journal of Economics 116(2), 447–487. doi. 10.1162/00335530151144078
Benabou, R. & Tirole, J. (2006). Belief in a just world and redistributive politics. Quarterly Journal of Economics 121(2), 699–746. 10.1162/qjec.2006.121.2.699
Brunner, K. & Meckling, W.H. (1977). The perception of man and the conception of government. Journal of Money, Credit, and Banking 9(1), 70–85. doi. 10.2307/1992000
Cameron, D. (1978). The expansion of the public economy: A comparative analysis. American Political Science Review 72(4), 1243–1261. doi. 10.2307/1954537
Cukierman, A. & Meltzer, A.H. (1986). A theory of ambiguity, credibility, and inflation under discretion and asymmetric information. Econometrica 54(5), 1099–1128. doi. 10.2307/1912324
Deininger, K. & Squire, L. (1996). A new data set measuring income inequality. World Bank Economic Review 10(3), 565–591. doi. 10.1093/wber/10.3.565
Downs, A. (1957). An Economic Theory of Democracy. Harper & Row.
Feld, L.P., Fischer, J.A. & Kirchgaessner, G. (2007). The effect of direct democratic institutions on income redistribution: Evidence for Switzerland. Working Paper Series in Economics and Finance 689, Stockholm School of Economics. [Retrieved from].
Fong, C., Bowles, H. & Gintis, H. (2006). Strong reciprocity and the welfare state. in S.C. Kolm, & J.M. Ythier (Eds), Handbook of the Economics of Giving, Altruism and Reciprocity, (pp.1439-1464), Elsevier.
Fong, C. & Oberholzer-Gee, F. (2007). Willingness to pay for justice: Evidence from an experiment on giving to the poor. Working Paper. [Retrieved from].
Garret, G. (2000). Globalization and government spending around the world. CEACS Estudio Working Paper, No.2000/155. [Retrieved from].
Gilens, M. (1999). Why Americans Hate Welfare: Race, Media, and the Politics of Antipoverty Policy. University of Chicago Press.
Gruber, J. & Hungerman, D.M. (2007). Faith-based charity and crowd out during the great depression. Journal of Public Economics 91(5–6), 1043–1069. 10.1016/j.jpubeco.2006.11.004
Hirschman, A. & Rothschild, M. (1973). The changing tolerance of income inequality in the course of economic development. Quarterly Journal of Economics 87(4), 544–566. 10.2307/1882024
Hungerman, D.M. (2005). Are church and state substitutes? Evidence from the 1996 welfare reform. Journal of Public Economics 89(11-12), 2245–2267. 10.1016/j.jpubeco.2004.12.009
Inman, Robert, P. & Rubinfeld, D.L. (1992). Fiscal federalism in Europe, lessons from the United States experience. European Economic Review 36(4), 654–660. 10.1016/0014-2921(92)90124-F
Katzenstein, P.J. (1985). Small States in World Markets: Industrial Policy in Europe. Cornell University Press.
Kinder, D.R. & Sanders, L.M. (1996). Divided by Color: Racial Politics and Democratic Ideals. University of Chicago Press.
Koster, F. (2008). The effects of social and political openness on the welfare state in 18 OECD countries. International Journal of Social Welfare 17(4), 291–300. 10.1111/j.1468-2397.2008.00552.x
Lizzeri, A. & Persico, N. (2001). The provision of public goods under alternative electoral incentives. The American Economic Review 91(1), 225–239. doi. 10.1257/aer.91.1.225
Luttmer, E.F.P. (2001). Group loyalty and taste for redistribution. Quarterly Journal of Economics 109(3), 500–528. 10.1086/321019
Luttmer, E.F.P. & Singhal, M. (2008). Culture, context, and the taste for redistribution. NBER Working Paper, No.14268. doi. 10.3386/w14268
Meltzer, A.H. & Richard, S.F. (1981). A rational theory of the size of government. Journal of Political Economy 89(5), 914–927. 10.1086/261013
Milesi-Ferretti, G.M., Perotti, R., & Rostagno, M. (2002). Electoral systems and public spending. Quarterly Journal of Economics 117(2), 609–657. 10.1162/003355302753650346
Molnár, G. & Kapitány, Z. (2006a). Mobility, uncertainty and subjective well-being in Hungary. Discussion Paper 2006/5, Institute of Economics, Hungarian Academy of Science. [Retrieved from].
Molnár, G., & Kapitány, Z. (2006b). Uncertainty and the demand for redistribution. Discussion Paper 2006/8, Institute of Economics, Hungarian Academy of Science. [Retrieved from].
Moser, P., (1994). Constitutional protection of economic rights: The Swiss and U.S. experience in comparison. Constitutional Political Economy 5(1), 61–79. 10.1007/BF02393256
Muren, A., & Nyberg, S. (2005). Young liberals and old conservatives - inequality, mobility and redistribution. CESifo Working Paper, No.1581. [Retrieved from].
Neustadt, I. (2011). Do religious beliefs explain preferences for income redistribution? Experimental evidence. CESifo Economic Studies 57(4), 623–652. 10.1093/cesifo/ifr002
Neustadt, I. & Zweifel, P. (2009). Economic well-being, social mobility, and preferences for income redistribution: Evidence from a discrete choice experiment. SOI Working Paper 0909, University of Zurich, Socioeconomic Institute. [Retrieved from].
OECD (1996). Employment Outlook.
Persson, T., Roland, G., & Tabellini, G. (1997). Separation of powers and political accountability. Quarterly Journal of Economics 112(4), 310–327. doi. 10.1162/003355300555457
Persson, T., & Tabellini, G. (2000). Political Economics: Explaining Economic Policy. MIT Press.
Persson, T., & Tabellini, G. (2003). The Economic Effects of Constitutions. Munich Lectures in Economics. MIT Press.
Ravallion, M., & Lokshin, M. (2000). Who wants to redistribute? The tunnel effect in 1990s Russia. Journal of Public Economics 76(1), 87–104. doi. 10.1016/S0047-2727(99)00064-X
Razin, A., & Sadka, E. (1995). Population Economics. MIT Press.
Roberts, K.W.S. (1977). Voting over income tax schedules. Journal of Public Economics 8(3), 329-340. doi. 10.1016/0047-2727(77)90005-6
Rodrik, D. (1998). Why do more open economies have bigger governments? Journal of Political Economy 106(5), 997–1032. doi. 10.1086/250038
Romer, T. (1975). Individual welfare, majory voting, and the properties of a linear income tax. Journal of Public Economics 4(2), 163–185. doi. 10.1016/0047-2727(75)90016-X
Scheve, K., & Stasavage, D. (2006a). Religion and preferences for social insurance. Quarterly Journal of Political Science 1(3), 255–286. doi. 10.1561/100.00005052
Scheve, K., & Stasavage, D. (2006b). The political economy of religion and social insurance in the United States, 1910-1939. Studies in American Political Development 20(3), 132–159. doi. 10.1017/S0898588X06000071Zweifel, P. (2007). The theory of social health insurance. Foundations and Trends in Microeconomics 3(3), 183–273. doi. 10.1561/0700000004
- There are currently no refbacks.
Journal of Economics and Political Economy - J. Econ. Pol. Econ. - JEPE - www.kspjournals.org
Copyright © KSP Library