Political Science Income Dynamics and Politics in North America and Europe
by
Austin Nichols
  • LAST REVIEWED: 04 May 2015
  • LAST MODIFIED: 28 May 2013
  • DOI: 10.1093/obo/9780199756223-0073

Introduction

Income dynamics and politics encompasses several disparate fields of theoretical and empirical work in the social sciences, e.g., the effect of changes in macroeconomic conditions or income distributions on political outcomes and the effect of individual income dynamics on activity in the political sphere. The topic also includes an enormous literature on the welfare state, including its origins, function, and changes due to external influence. The works cited in this article are organized into four very broad categories, focused on types of income dynamics, macro effects of income dynamics, effects of income dynamics on levels of government, and effects on, and of, the welfare state. Many works appear in economics journals, even if they pertain directly to politics, though some appear in journals of political science and sociology. Recent works in political science focus on the deleterious effect of increasing income risk (including income inequality) on political stability or polarization of opinions, though obviously political strife can, in turn, increase various kinds of income risk, and the direction of the causal chain is not clearly established in much of the work that examines associations.

Income Dynamics

Inequality is increasing both in the United States, as most famously described in Piketty and Saez 2003, and in other countries, as shown in Organisation for Economic Co-operation and Development 2008, Organisation for Economic Co-operation and Development 2011, and Smeeding 2005, though changes in income dynamics may or may not offset the increase, and the changes are both within and between cohorts and partly due to population and technology changes. Jäntti 2009 characterizes how changes in income dynamics offset the increase in inequality. There are many other aspects of income dynamics as well, including heterogeneous variation in income growth rates (mobility), volatility of income (measured often with observed year-to-year variation around a long-run trend), and intergenerational links in lifetime incomes. Not all authors find mobility or income volatility increasing, including Kopczuk, et al. 2010, though this may often be due to income definitions and sample selection rules, as shown in Nichols and Zimmerman 2008. Nichols 2008 decomposes income risks into long-run inequality, volatility, and mobility risk and finds all three increasing in the United States. Findings on mobility, in particular, depend crucially on definitions and assumptions.

  • Jäntti, Markus. “Mobility in the United States in Comparative Perspective.” Focus 26.2 (Fall 2009): 38–42.

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    Summarizes much of the literature on income mobility in comparing developed countries.

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  • Kopczuk, Wojciech, Emmanuel Saez, and Jae Song. “Earnings Inequality and Mobility in the United States: Evidence from Social Security Data since 1937.” Quarterly Journal of Economics 125.1 (2010): 91–128.

    DOI: 10.1162/qjec.2010.125.1.91Save Citation »Export Citation »E-mail Citation »

    Finds virtually all of the increase in earnings variance due to “permanent” (as opposed to “transitory”) earnings variation. Mobility at the top of the earnings distribution is said to be stable; short-term earnings mobility stable but long-term mobility increased since the 1950s in the United States. Supplementary online appendix.

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  • Nichols, Austin. Trends in Income Inequality, Volatility, and Mobility Risk. IRISS Working Paper 2008-10. Differdange, Luxembourg: Institute for Research and Innovation in Social Services, 2008.

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    Uses a novel generalized entropy measure defined on panel data from the United States to decompose income risk into long-run inequality, volatility, and mobility risk, and finds all three increasing over time. Tax regime changes appear to have changed the progressivity of income growth.

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  • Nichols, Austin, and Seth Zimmerman. Measuring Trends in Income Variability. Washington, DC: Urban Institute, 2008.

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    Finds a more robust upward trend in US intertemporal income variability for family incomes than for own earnings and an increased covariance over time in earnings of family members due to changing employment patterns of women, which explains why those using their own earnings find little change in risk over the last few decades but those using family income find large increases.

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  • Organisation for Economic Co-operation and Development (OECD). Growing Unequal? Income Distribution and Poverty in OECD Countries. Paris: Organisation for Economic Co-operation and Development, 2008.

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    Emphasizes that the gap between rich and poor grew modestly in most OECD countries over three decades, using a measure (Gini) that gives greater weight to variation around the median than to extremes. The same information is cast in a different light in the 2011 report, which converts growth in Gini into percentage terms to make it seem larger and more comparable to other findings on the growth in inequality.

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  • Organisation for Economic Co-operation and Development (OECD). Divided We Stand: Why Inequality Keeps Rising. Paris: Organisation for Economic Co-operation and Development, December 2011.

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    Focuses instead on the 10th and 90th percentiles and attributes large increases in inequality to eight factors, including tax and benefit systems becoming less redistributive since the mid-1990s due mainly to cuts to benefit levels, tightening of eligibility rules to contain expenditures for social protection, and the failure of transfers to the lowest income groups to keep pace with earnings growth all contributed.

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  • Piketty, Thomas, and Emmanuel Saez. “Income Inequality in the United States, 1913–1998.” Quarterly Journal of Economics 118 (February 2003): 1–39.

    DOI: 10.1162/00335530360535135Save Citation »Export Citation »E-mail Citation »

    Shows increasing inequality in incomes in America driven by increases in incomes among the superrich, fractions of the top percentile. Appendixes updated several times since 2003 are available online (see “Income and Wealth Inequality”), and subsequent work by Piketty and Saez explores related themes and theoretical results.

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  • Smeeding, Timothy M. “Public Policy, Economic Inequality, and Poverty: The United States in Comparative Perspective.” Social Science Quarterly 86 (2005): 955–998.

    DOI: 10.1111/j.0038-4941.2005.00331.xSave Citation »Export Citation »E-mail Citation »

    Compares levels and trends in inequality across OECD nations and the effects of government policies and social spending on inequality.

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Reasons for the Increase in Inequality

No consensus has emerged on the reasons for the increase in income inequality, though skill-biased technical change, globalization and trade, institutions protecting labor, and political institutions and political views are often advanced. The debate between those who posit a greater role for skill-biased technical change (mostly exogenous advances, e.g., computer chips doubling in productivity every twelve years) and those who posit a greater role for institutions (possibly due to differing political views) has been particularly prominent in the economics literature. Katz and Murphy 1992 makes a strong case for shifts in production technology rewarding higher skilled workers, and Krueger 1993 provides evidence that workers with computers earned a premium. Katz and Autor 1999 summarizes the evidence on shifts in technology as a source of rising inequality in wages. Card and Dinardo 2002 argues against shifts in technology as an omnibus explanation, and Lemieux 2006 argues that measurement error was a very important factor. Autor, et al. 2008 presents the strongest argument for technology and the authors do so against a rising tide of authors presenting evidence of other important factors. Gosselin and Zimmerman 2008 presents evidence that year-to-year variability of incomes also plays a role, with similar rates of life events over thirty years but larger income losses.

Intragenerational Income Dynamics, Measurement of Mobility and Volatility

Inequality of incomes within a cohort represents an ex ante income risk, but income changes over time within a cohort as well. Within one person’s life, income changes both gradually (trending up typically) and abruptly up and down, just as a stock price changes; we refer to this as intragenerational income change to distinguish from changes across cohorts. Income changes include shocks both endogenous (e.g., exiting the labor force due to childbirth) and exogenous (e.g., plant closings) to individual preferences and behavior. The rates of these income changes are measured in a variety of ways, including “transitory variance” methods made famous in Gottschalk and Moffitt 1994 and Moffitt and Gottschalk 2002, estimates of variance of observed income (sometimes conditional on age and other factors), or incidence of abrupt changes to income, all of which use observed variability of income (though income is endogenously determined by policy and individual behavior). Intertemporal variability of income is typically found to be increasing, at least when changes in earnings on the extensive margin (movements to zero earnings and back) are included, which can be seen either as a source of increased income risk (Nichols 2008, cited under Income Dynamics; Hacker 2004, cited under Effects of Voter Distribution) or as a factor mitigating increased income inequality because the same people may not be rich at two points in time. No consensus exists on measuring income mobility or volatility, e.g., ten-year income quintile transition matrices, as in Auten and Gee 2009, and conflating year-to-year variation in income and long-term trends. Acs, et al. 2009 exploits intra-year variation.

Intragenerational Income Dynamics, Comparisons of Levels and Trends

Long-run intragenerational income change, or mobility, is typically found to be fairly stable over time, though differences are found across countries. Aaberge, et al. 2002 finds higher mobility in Scandinavian countries compared to the United States. Chen 2009 finds that the United States has higher mobility and higher inequality than Germany, with Britain occupying an intermediate position. Gangl 2005 finds most European countries have lower inequality than the United States even after accounting for mobility differences. Hertz 2007, Sawhill 2008, and Acs and Zimmerman 2008 find little change in mobility over time in US data. Burkhauser and Couch 2009 summarizes this body of research concisely.

Poverty Dynamics

Many studies looking at factors predicting entry into and exit from poverty or examining trends in poverty connect these dynamics to policy, but few connect dynamics to politics. Early studies looked more at the impact of family characteristics on poverty dynamics, and they focused less on the effect of policy. Bane and Ellwood 1986 initiates a series of studies on poverty exit by pointing out the central role of family and household composition change. Duncan, et al. 1993 compares across Europe and America in the same vein and found that black Americans were uniquely disadvantaged. Leisering and Leibfried 1999 and Goodin, et al. 1999 are important examples of the research that followed in this vein. Bradbury, et al. 2001 includes a number of contributions collected in one convenient volume. Recent work comparing across European countries includes Fourage and Layte 2005 and work is in progress in using various cross-European datasets, e.g., ECHP or EU-SILC. Jenkins 2011 and others find little change over the last two decades in the persistence of poverty.

Link to Intergenerational Mobility

Many studies look examine a five- or ten-year period, e.g., six-year poverty dynamics in Oxley, et al. 2000, conflating year-to-year variation in income and long-term trends. Measurements of longer-term intragenerational income dynamics, such as the persistence of poverty from childhood into adulthood examined in Corak 2006, Valletta 2006, and Ratcliffe and McKernan 2010, come close to measuring intergenerational dynamics.

Dimensions of Poverty and Mobility

Poverty is often conceptualized as multidimensional deprivation rather than income poverty; the literature is widespread on multidimensional deprivation dynamics, e.g., Nolan and Whelan 2010; Whelan, et al. 2004; and Nolan and Whelan 2011. Osberg 2000 examines the impact of trade liberalization (an important trend in the 1990s) and social policy on the poverty gap.

Intergenerational Income Dynamics

Sociologists carried out much early work on intergenerational income dynamics, and much of it concerned rigidities in classes defined by occupation. Recent work has focused more on income, especially with the advent of better data, which allows income to be measured over a longer period of time with less error, as pioneered in Solon 1992 and pursued further in Haider and Solon 2006. Rigidities are measured via transition matrices or intergenerational elasticities, i.e., the correlation of log parental income and log child income. Typically, the United States and the United Kingdom are found to have less mobile transition matrices and higher intergenerational elasticities than the balance of Europe (Corak 2006, cited under Link to Intergenerational Mobility), as explained in depth in Björklund and Jäntti 2009. More mobility within a generation in the United States can explain greater tolerance of more inequality at a point in time as low-income workers may believe they can become rich in the future; less mobility across generations should not explain tolerance of more inequality at a point in time, as parents believe their children will wind up at their same point in the income distribution. As Sawhill and Morton 2007 states: “The belief in America as a land of opportunity may also explain why rising inequality in the United States has yielded so little in terms of responsiveness from policy makers” (p. 3). Mobility in education is related to income mobility and similar techniques are used, though data may be measured with less error for education than for income and better data allows for richer explorations, as in Hertz, et al. 2007 and Nichols and Favreault 2009.

Effects of Increased Income Risk

Increased income risk has contributed to polarized political views, as found in Rehm 2011, and thereby affected policy; it also affects civic engagement and social capital, as found in Alesina and La Ferrara 2002 and Costa and Kahn 2003, and it may directly affect economic growth. According to Benabou 1996, faster growth can arise from inequality, and Forbes 2000 finds empirical evidence supporting that hypothesis, though Roodman 2009 finds that the empirical evidence shows no clear link at all.

Changes in Inequality, Economic Growth, and Political Outcomes

Macro income dynamics involve at least two major forces: growth and changes in inequality. These two may be connected, as Kuznets 1955 and many other works point out; recent work includes endogenous growth models. Empirical works, including Deininger and Squire 1998, Barro 2000, Atkinson and Brandolini 2001, and Banerjee and Duflo 2003, find a weak link. Banerjee and Newman 1993 emphasizes the role of moral hazard in creating and sustaining inequality in a tractable growth model. Aghion, et al. 1999 summarizes the role of market failures in establishing a link between inequality and growth.

Mechanisms

Some models of the link between growth and inequality posit a political mechanism for the link, e.g., greater inequality leads to political and social unrest that tends to reduce economic growth. Alesina and Rodrik 1994 and Persson and Tabellini 1994 make the link between growth and inequality by positing that greater inequality leads to higher taxes, which distort markets and lower growth rates; Murphy, et al. 1989 posits a different link in trade. Partridge 1997 argues that the results in Persson and Tabellini 1994 are overstated. Li and Zou 1998 argues the contrary position, namely that inequality can promote growth. Bénabou and Ok 2001 outlines a mechanism by which expectations of future growth could undermine support for social insurance. See also Clarke 1995.

Voters at Different Points in the Income Distribution

Meltzer and Richard 1981 uses a median voter model to illustrate that a rising concentration of income at the top of the income distribution can reduce the tax price of spending for a the pivotal voter, who then demands more public good provision, including social insurance; see also Mirrlees 1971. Nevertheless, international comparisons have detected limited support for the link between income inequality and government spending, as seen in Perotti 1993, Perotti 1996, and Persson and Tabellini 2003. However, many studies have found only a weak link between income inequality and redistribution, such as Perotti 1996, Persson and Tabellini 2003, and Alesina and Glaeser 2004. Milanovic 2000 and Karabarbounis 2011 are exceptions.

  • Alesina, Alberto, and Edward Glaeser. Fighting Poverty in the US and Europe: A World of Difference. Oxford: Oxford University Press, 2004.

    DOI: 10.1093/0199267669.001.0001Save Citation »Export Citation »E-mail Citation »

    Compares the United States and Europe with regard to the problems of domestic inequality and poverty and the redistribution of income. Posits possible economic explanations for the difference, including different levels of pre-tax income, openness to trade, and social mobility, and discusses electoral and legal systems, character of political parties, war, and sociological, including attitudes to the poor and notions of social responsibility as well as race.

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  • Karabarbounis, Loukas. “One Dollar, One Vote.” Economic Journal 121.553 (2011): 621–651.

    DOI: 10.1111/j.1468-0297.2010.02406.xSave Citation »Export Citation »E-mail Citation »

    Finds that more affluence in the upper half of the distribution is associated with less redistribution, and more affluence in the lower half of the distribution is associated with more redistribution, consistent with a one dollar, one vote equilibrium: when the income of a group increases, redistributive policies tilt toward the group’s preferred policies.

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  • Meltzer, Alan H., and Scott F. Richard. “A Rational Theory of the Size of the Government.” Journal of Political Economy 89 (1981): 914–927.

    DOI: 10.1086/261013Save Citation »Export Citation »E-mail Citation »

    A pivotal voter near the middle of the income distribution benefits from higher equilibrium tax rates and spending when inequality is higher since higher-income voters pay a larger share.

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  • Milanovic, Branko. “The Median Voter Hypothesis, Income Inequality and Income Redistribution: An Empirical Test with the Required Data.” European Journal of Political Economy 16.3 (2000): 367–410.

    DOI: 10.1016/S0176-2680(00)00014-8Save Citation »Export Citation »E-mail Citation »

    Finds that countries with greater inequality of factor income redistribute more to the poor but very weak evidence that the median-voter hypothesis adequately describes collective choice.

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  • Mirrlees, James. “An Exploration in the Theory of Optimum Income Taxation.” Review of Economic Studies 38 (1971): 175–208.

    DOI: 10.2307/2296779Save Citation »Export Citation »E-mail Citation »

    A paper worthy of Nobel mention: a fundamental step forward in explaining goals and limitations in social welfare–maximizing taxation, forming a starting point for all subsequent literature.

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  • Perotti, Roberto. “Political Equilibrium, Income Distribution, and Growth.” Review of Economic Studies 60 (1993): 755–776.

    DOI: 10.2307/2298098Save Citation »Export Citation »E-mail Citation »

    Seeks to distinguish empirically among alternative explanations for connections between inequality and growth, including imperfect capital markets, or differential incentives to engage in rent-seeking, or effects on the bargaining process over the size and use of taxes, or the pattern of government expenditure as determined by the political equilibrium resulting from a given income distribution.

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  • Perotti, Roberto. “Growth, Income Distribution and Democracy: What the Data Say.” Journal of Economic Growth 1.2 (1996): 149–187.

    DOI: 10.1007/BF00138861Save Citation »Export Citation »E-mail Citation »

    Seeks to distinguish empirically among alternative explanations for connections between inequality and growth.

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  • Persson, Torsten, and Guido Tabellini. The Economic Effects of Constitutions. Cambridge, MA: MIT Press, 2003.

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    Interprets the link between inequality and political outcomes in light of constitutional constraints.

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Individual and Firm Politics and Inequality

Much work has focused on stories of why different groups seem to exhibit the interests they do on a national political stage, particularly in the polarized American context. Soskice 1990 explains that employers may support mechanisms for risk-sharing and the author creates a typology of nations based on the theory and perceptions of systems in different countries. Hacker 2002 shows how a large share of welfare state benefits in the United States have historically been provided by corporations. Bartels 2008 argues that Republican presidents have increased inequality but co-opted the voters they hurt with well-timed boosts to income growth. Gelman 2010 argues that income and not religion or culture explains voting behavior. Fiorina, et al. 2011 argues that voters are fairly close in preferences but small differences have been magnified. Abramowitz 2010 shows that those with more extreme preferences have become more politically active, hollowing out the middle ground of political discourse.

  • Abramowitz, Alan The Disappearing Center: Engaged Citizens, Polarization, and American Democracy. New Haven, CT: Yale University Press, 2010.

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    Posits that political enclaves have formed during the last fifty years that encourage more strongly entrenched opinions. Those with stronger left or right leanings were more politically engaged in 2004, which was less true in the 1950s, so coalitions of moderates are no longer possible. The direction of causation is far from clear, however.

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  • Bartels, Larry Unequal Democracy: The Political Economy of the New Gilded Age. Princeton, NJ: Princeton University Press, 2008.

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    Under Republican presidents, there has been much less income growth for middle-class and working-poor families than for affluent families, greatly increasing inequality. Many voters seem to vote against their own economic interests not because of “values issues,” such as abortion and gay marriage, but due to successful timing of income growth by Republican administrations to cater to short-sighted voters.

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  • Fiorina, Morris P., Samuel J. Abrams, and Jeremy C. Pope. Culture War? The Myth of a Polarized America. 3d ed. Boston: Pearson Longman, 2011.

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    Uses polling data to advance the claim that Americans are not deeply divided in their fundamental political views. Instead, small differences in opinion have been magnified by rhetoric and by how issues are framed.

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  • Gelman, Andrew. Red State, Blue State, Rich State, Poor State: Why Americans Vote the Way They Do. Princeton, NJ: Princeton University Press, 2010.

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    Finds less wealthy voters more likely to vote Democratic in the United States; wealthier voters more likely to vote Republican. Yet, states with a higher average income are more likely to support a Democratic presidential candidate. These relationships hold on a county level as well. Other factors such as religiosity and cultural values play less of a role in explaining voting behavior.

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  • Hacker, Jacob S. The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States. Cambridge, UK: Cambridge University Press, 2002.

    DOI: 10.1017/CBO9780511817298Save Citation »Export Citation »E-mail Citation »

    Points out that the welfare regime in the United States relies heavily on private social benefits provided by employers, for example, private health insurance, rather that providing many benefits as universal entitlements, but that the overall size is comparable to European welfare states.

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  • Soskice, David. “Reinterpreting Corporatism and Explaining Unemployment: Co-ordinated and Non-co-ordinated Market Economies.” In Labour Relations and Economic Performance. Edited by Renato Brunetta and Carlo Dell’Aringa, 170–211. London: Macmillan, 1990.

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    Employers may have an interest in the viability of risk-sharing pools such as national unions, leading to a “virtuous circle of innovation, retraining and employment security” (p. 196). Develops a widely cited typology of countries using a less than transparent methodology.

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Effects of Voter Distribution

Jacobs and Skocpol 2005 examines how inequality affects political activity. Bartels 2008 (cited under Individual and Firm Politics and Inequality) and McCarty, et al. 2006 deal with the effects of inequality on federal taxation and immigration. Skocpol and Amenta 1986 surveys a wide variety of explanations posited as reasons for expansions of social insurance; Hacker and Pierson 2002 argues that employers were excluded from the expansion of the US welfare state. Hacker and Pierson 2010 argues that interest group politics have brought about a “winner-take-all” society resulting in increased inequality, in part via a devolution of risk from institutions onto individuals (Hacker 2004, Hacker 2006) at the national level. Epple and Romano 1996 proposes an “ends against the middle” model in which high- and low-income voters form coalitions to defeat policies favored by the median voter.

  • Epple, D., and R. E. Romano. “Ends against the Middle: Determining Public Service Provision When There Are Private Alternatives.” Journal of Public Economics 62.3 (1996): 297–325.

    DOI: 10.1016/0047-2727(95)01540-XSave Citation »Export Citation »E-mail Citation »

    High- and low-income voters form coalitions to defeat policies favored by the median voter.

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  • Hacker, Jacob S. “Privatizing Risk without Privatizing the Welfare State: The Hidden Politics of Social Policy Retrenchment in the United States.” American Political Science Review 98.2 (2004): 243–260.

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    Questions the view that few welfare states have experienced fundamental shifts by reconsidering the post-1970s trajectory of the American welfare state. US social policy has offered increasingly incomplete risk protection, reflecting successful strategies adopted by opponents of popular and stable policies.

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  • Hacker, Jacob S. The Great Risk Shift: The New Economic Security and the Decline of the American Dream. Oxford: Oxford University Press, 2006.

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    Argues that individual families’ income risk has increased over time, in part due to retrenchment of risk mitigation by governments and corporations.

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  • Hacker, Jacob S., and Paul Pierson. “Business Power and Social Policy: Employers and the Formation of the American Welfare State.” Politics and Society 1992.30 (2002): 277–325.

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    Shows that business interests, which were largely opposed to expansions of social insurance, were sidelined in the creation of the pillars of the American welfare state.

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  • Hacker, Jacob S., and Paul Pierson. Winner-Take-All Politics: How Washington Made the Rich Richer— And Turned Its Back on the Middle Class. New York: Simon and Schuster, 2010.

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    Argues that the growing inequality of incomes is due primarily to political processes rather than trade and globalization, technological change, increased returns to skill, or other similar factors. With both major parties in the United States catering to the top-income constituents, winner-take-all politics contributes to a winner-take-all economy that in turn fuels the political dysfunction.

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  • Jacobs, Lawrence R., and Theda Skocpol, eds. Inequality and American Democracy: What We Know and What We Need to Learn. New York: Russell Sage Foundation, 2005.

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    A series of chapters demonstrate that rising economic inequality threatens political equality in the United States.

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  • McCarty, Nolan, Keith T. Poole, and Howard Rosenthal. Polarized America: The Dance of Ideology and Unequal Riches. Cambridge, MA: MIT Press, 2006.

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    Political polarization and income inequality fell in tandem from 1913 to 1957 and both rose dramatically since 1977. The authors hypothesize a dual causal relationship in which polarization increases inequality and inequality increases polarization.

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  • Skocpol, Theda, and Edwin Amenta. “States and Social Policies.” Annual Review of Sociology 12 (1986): 131–157.

    DOI: 10.1146/annurev.so.12.080186.001023Save Citation »Export Citation »E-mail Citation »

    Surveys reasons for expansions of social insurance and points out that, once created, policies can themselves influence subsequent developments.

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Federal Systems and Inequality

Federalism is a key aspect of any investigation of inequality and politics; the Tiebout 1956 model of local public finance shows that sorting can result in no local income inequality and efficient provision of local public goods. Oates 1969 tests a Tiebout prediction that property taxes will be capitalized into the price of housing; the work spawned a literature on the subject. Buchanan 1965 shows that inequality (or indeed, heterogeneity of any kind) is costly and must be weighed against the benefits of economies of scale. Oates 1972 shows that centralization is costly when preferences vary but governments must offer a level of fixed services. All aspects of income dynamics and politics can change when viewed through a lens of federal political systems in which national and state or local governments may react differently, perhaps offsetting each other. Schwab and Oates 1991 describes an optimum level of community heterogeneity.

Federal Systems with Endogenous Jurisdictions

Tests of the Tiebout hypothesis in US data typically seek to determine whether heterogeneity increases as mobility costs decline (Rhode and Strumpf 2003), greater population heterogeneity leads to increases in the number of local governments (Fisher and Wassmer 1988), or the degree to which fiscal policies are capitalized into property value (Dowding, et al. 1994). Empirical work typically produces weak and inconsistent results in which the direction of causality is unclear and the results are consistent with alternative sorting motives such as racism (Martinez-Vazquez, et al. 1997; Bischoff 2008). Nelson 1990 finds that heterogeneity increases the number of special districts in a city. Weiher 1991 describes the interaction of local jurisdiction boundaries, political fragmentation, and local inequality. Lewis 1998 finds that Proposition 13 in California, which can provide incentives for the creation of new districts, did not substantially alter the state’s local government structure.

Federal Systems and Effects of Inequality on Local Public Goods

Alesina, et al. 2000 finds higher spending on public employment in more diverse communities, which the authors claim is disguised redistribution. Cutler, et al. 1993 and Poterba 1997 find lower support for public education spending in states with more elderly voters and larger shares of nonwhite students. On the other hand, Ladd and Murray 2001 and Harris, et al. 2001 do not detect this effect at the local level, perhaps because local spending differences are capitalized into property values. Alesina, et al. 2004 finds evidence of a trade-off between economies of scale and income inequality, Goldin and Katz 1999 discusses effects of racial fragmentation on the expansion of public education, and Brunner and Balsdon 2004 argues that capitalization of local spending into housing values and intergenerational altruism probably sustain support for local school spending among older voters.

  • Alesina, Alberto, Reza Baqir, and William Easterly. “Redistributive Public Employment.” Journal of Urban Economics 48.2 (September 2000): 219–241.

    DOI: 10.1006/juec.1999.2164Save Citation »Export Citation »E-mail Citation »

    In US cities, politicians use public employment as a disguised mechanism of income redistribution; the finding is that city employment is significantly higher in cities in which income inequality and ethnic fragmentation are higher.

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  • Alesina, Alberto, Reza Baqir, and Caroline Hoxby. “Political Jurisdictions in Heterogeneous Communities.” Journal of Political Economy 112.2 (2004): 348–396.

    DOI: 10.1086/381474Save Citation »Export Citation »E-mail Citation »

    Explores the formation of local political units (school districts) and finds evidence of a trade-off between economies of scale and income inequality but little evidence of effects of ethnic or religious heterogeneity.

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  • Brunner, Eric, and Ed Balsdon. “Intergenerational Conflict and the Political Economy of School Spending.” Journal of Urban Economics 56.2 (2004): 369–388.

    DOI: 10.1016/j.jue.2004.05.001Save Citation »Export Citation »E-mail Citation »

    Capitalization of local spending into housing values and intergenerational altruism probably together sustain support for local school spending among older voters.

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  • Cutler, David M., Douglas W. Elmendorf, and Richard Zeckhauser. “Demographic Characteristics and the Public Bundle.” Public Finance 48 (Suppl.) (1993): 178–198.

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    Examines how county and state spending in the United States is affected by the age and racial composition and the total size of a jurisdiction; state regressions differ from county regressions because a jurisdiction’s spending is affected differently by its own demographic characteristics and by the characteristics of the surrounding area.

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  • Goldin, Claudia, and Lawrence Katz. “Human Capital and Social Capital: The Rise of Secondary Schooling in America, 1910 to 1940.” Journal of Interdisciplinary History 29 (1999): 683–723.

    DOI: 10.1162/002219599551868Save Citation »Export Citation »E-mail Citation »

    Discusses the effects of racial fragmentation on the expansion of public education in America.

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  • Harris, Amy Rehder, William N. Evans, and Robert M. Schwab. “Education Spending in an Aging America.” Journal of Public Economics 81.3 (2001): 449–472.

    DOI: 10.1016/S0047-2727(00)00133-XSave Citation »Export Citation »E-mail Citation »

    Measures the impact of an aging population on public education spending and finds that the elderly have only a modest overall negative effect on education spending at the district level but a growing share of elderly at the state level tends to depress state spending on education. The elderly may believe only higher local spending is capitalized into house values.

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  • Ladd, Helen F., and Sheila E. Murray. “Intergenerational Conflict Reconsidered: County Demographics Structure and the Demand for Public Education.” Economics of Education Review 20.4 (2001): 343–357.

    DOI: 10.1016/S0272-7757(00)00058-3Save Citation »Export Citation »E-mail Citation »

    Analyzes the model proposed in Poterba 1997 using county-level rather than state-level data and finds that the effect of the elderly share of the population on education spending is small and not statistically different from zero.

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  • Poterba, J.M. “Demographic Structure and the Political Economy of Public Education.” Journal of Policy Analysis and Management 16.1 (1997): 48–66.

    DOI: 10.1002/(SICI)1520-6688(199724)16:1%3C48::AID-PAM3%3E3.0.CO;2-ISave Citation »Export Citation »E-mail Citation »

    The presence of more elderly residents in a jurisdiction reduces per child educational spending; reduction is particularly large when elderly and school-age populations are from different racial groups. Variation in the school-age population does not result in changes in education spending; thus, students in states with larger school-age populations receive lower per-student spending than those in states with fewer potential students.

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Effects of Inequality on Democratic Process

Interest groups can exploit heterogeneity and resulting uncertainty about the identity and preferences of the median voter to distort policies away from the pivotal voter’s preference. Kalt and Zupan 1990 points out the influence of ideology on the voting behavior of legislators. Gerber and Lewis 2004 argues that more homogenous districts more closely adhere to a median voter model. Matsusaka and McCarty 2001 argues that the availability of initiatives can push legislators farther from median preferences. Husted and Kenny 1997 argues that poorer pivotal voters taxing richer voters contributed to the growth of welfare spending in the United States.

Effects of Political Process on Inequality

Numerous authors over many decades have documented specific impacts of policy or political outcomes on the distribution of income or wealth; recent work often seeks to add nuance to assessing distributional impacts. Rueda 2008 argues that welfare state generosity does not affect inequality and that effects of government partisanship on minimum wages and of minimum wages on inequality are only present when corporatism is low. Scheve and Stasavage 2009 affirms that centralized wage bargaining and a left-wing government did not lower inequality. In contrast, Kelly 2011 argues that opinion, party control of government, and ideology affect income and wealth distribution through two mechanisms. Beramendi and Anderson 2011 is an edited volume containing a wealth of recent material.

  • Beramendi, Pablo, and Christopher J. Anderson, eds. Democracy, Inequality, and Representation: A Comparative Perspective. New York: Russell Sage Foundation, 2011.

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    Political scientists and economists use international data in a series of papers to examine the political causes and consequences of income inequality.

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  • Kelly, Nathan J. The Politics of Income Inequality in the United States. Cambridge, UK: Cambridge University Press, 2011.

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    Public opinion, party control of government, and the ideological direction of policy all affect income and wealth distribution. Shifts to the left produce reductions in inequality through two mechanisms: explicit redistribution and market conditioning.

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  • Rueda, David. “Left Government, Policy, and Corporatism: Explaining the Influence of Partisanship on Inequality.” World Politics 60 (April 2008): 349–389.

    DOI: 10.1017/S0043887100009035Save Citation »Export Citation »E-mail Citation »

    Government employment is a strong determinant of inequality; welfare state generosity does not affect inequality and is not associated with left-wing government. The effects of government partisanship on minimum wages and of minimum wages on inequality are only present when corporatism is low. Explores why corporatism mitigates or magnifies the influence of government partisanship and policy on inequality.

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  • Scheve, Kenneth, and David Stasavage. “Institutions, Partisanship, and Inequality in the Long Run.” World Politics 61.2 (April 2009): 215–253.

    DOI: 10.1017/S0043887109000094Save Citation »Export Citation »E-mail Citation »

    Finds little evidence that centralized wage bargaining and a left-wing government are associated with lower levels of income inequality. The authors make use of new data on top income shares as well as long-run series on wage inequality. In countries that moved to centralize wage bargaining, income inequality had already been trending downward well before the institutional change. Structural economic changes or commonly shared economic and political events, such as world wars and economic crises, seem to be more important.

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Effects of Inequality on Civic Engagement

Civic engagement is higher in less homogenous jurisdictions, perhaps because the potential for conflict is higher. Peterson 1981 argues it is different with regard to local governments; national and state governments pursue a redistributive policy agenda, but local entities focus on development. Verba, et al. 1995 and Scholzman, et al. 2012 argue that political mobilization is unequally distributed and organizations are even less representative than expressions of individual opinion. Pontusson and Rueda 2010 finds that parties will respond to an increase in inequality only when low-income voters are politically mobilized. Oliver 2001 posits that increased civic engagement results in greater agreement about policy.

  • Oliver, J. Eric. Democracy in Suburbia. Princeton, NJ: Princeton University Press, 2001.

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    Policy agreement across the income distribution is promoted by increased civic engagement, which is proxied by membership rates in American communities.

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  • Peterson, Paul. City Limits. Chicago: University of Chicago Press, 1981.

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    Local politics have higher levels of direct engagement, so jurisdictions can focus solely on improving the economic well-being of the municipality. Three types of public policies are noted: redistributive, allocational, and developmental; national and state governments pursue a redistributive policy agenda, but local entities focus on developmental policies.

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  • Pontusson, Jonas, and David Rueda. “The Politics of Inequality: Voter Mobilization and Left Parties in Advanced Industrial States.” Comparative Political Studies 43 (June 2010): 675–705.

    DOI: 10.1177/0010414009358672Save Citation »Export Citation »E-mail Citation »

    High levels of inequality move left-wing parties farther left, but doing so makes some individuals less likely to be involved in politics. Parties on the left will respond to an increase in inequality only when low-income voters are politically mobilized.

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  • Scholzman, Kay Lehman, Sidney Verba, and Henry E. Brady. The Unheavenly Chorus: Unequal Political Voice and the Broken Promise of American Democracy. Princeton, NJ: Princeton University Press, 2012.

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    Examines political participation of individuals and organized interests (unions, professional associations, trade associations, citizens groups, corporations, hospitals, and universities). Finds deeply ingrained and persistent class-based political inequality and the political voices of organized interests are even less representative than those of individuals. Also finds that political advantage is handed down across generations.

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  • Verba, Sidney, Kay Lehman Schlozman, and Henry E. Brady. Voice and Equality. Cambridge, MA: Harvard University Press, 1995.

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    If organizations do not promote participation equally, voluntary membership groups may actually reinforce existing biases in political participation to favor the privileged.

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The Welfare State and Insurance

Most forms of social insurance are optimally provided at the highest level of government so as to pool to the maximum extent across risk classes; the collection of tax and transfer policies together with social insurance constitute the “welfare state.” Baldwin 2003 describes the growth of the welfare state over the last century in tracing the increased reach of social insurance to new risks and new populations. Economists, examples of whose works include Arrow 1969 and Stiglitz 1998, typically think of social insurance in the same terms as private insurance with the distinction that a market failure necessitates government intervention, e.g., unemployment insurance. Such market failures come in many varieties, e.g., adverse selection, moral hazard, and natural monopoly.

  • Arrow, Kenneth J. “The Organization of Economic Activity: Issues Pertinent to the Choice of Market versus Non-market Allocations.” In The Analysis and Evaluation of Public Expenditures: The PPB System: A Compendium of Papers. By Joint Economic Committee of Congress, 47–64. Washington, DC: US Government Printing Office, 1969.

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    Classic statement of conditions for market failures that necessitate government intervention. Arrow’s article is reprinted in his Collected Papers of Kenneth J. Arrow: General Equilibrium, Vol.2 (Cambridge, Mass. Belknap Press of Harvard Univ. Press 1984), pp. 133–155

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  • Baldwin, Peter. The Politics of Social Solidarity: Class Bases of the European Welfare State, 1875–1975. Cambridge, UK: Cambridge University Press, 2003.

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    Describes the welfare state in terms of types of social insurance, with growth during the last century involving the increased reach of social insurance to new risks and new populations.

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  • Stiglitz, Joseph E. “The Private Uses of Public Interests: Incentives and Institutions.” Journal of Economic Perspectives 12.2 (1998): 3–22.

    DOI: 10.1257/jep.12.2.3Save Citation »Export Citation »E-mail Citation »

    Describes conditions for incentives for, and information concerning, the creation of market failures, which necessitate government intervention.

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The Welfare State and Redistribution

One universal type of risk that cannot be addressed with private insurance is the social standing and economic opportunities of the family into which one is born; Rawls 1971 provides the classic treatment of this type of risk. However, our interpretation of this type of “social risk at birth” depends crucially on the various types of income mobility discussed in Income Dynamics. Many researchers have sought to measure the extent to which government taxes and benefits (the tax and transfer system) reduce economic inequality (Kenworthy and Pontusson 2005) and other forms of income risk (Nichols 2008, cited under Income Dynamics). Typologies of the welfare state usually rest on the extent of redistribution, typically proxied by the size of the expenditures involved, or comparisons of after-tax and pre-tax income inequality. Esping-Andersen 1990 proposes types of welfare state in modern developed capitalist nations based on a “decommodification index.” Esping-Andersen 1999 describes contemporary welfare regimes by discussing institutional diversity and the role of the household. Piketty 1995 proposes a model in which individuals learn how much they would like to support increased social insurance, but society can still become more fragmented over time. Fernandez and Rogerson 1996 suggests that redistribution can produce a dynamic of increasing quality of public goods and falling tax rates with greater welfare for all. Mahler and Jesuit 2010 argues that distortions to savings caused by public pensions make conventional measures overstate the level of redistribution. In an empirical examination of thirteen countries over twenty-five years, Mahler 2010 finds direct government redistribution to increase based on the extent of pre-government inequality, the level of electoral turnout, the share of the labor force that is unionized, and the presence of proportional representation electoral systems.

  • Esping-Andersen, Gøsta. The Three Worlds of Welfare Capitalism. Princeton, NJ: Princeton University Press, 1990.

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    A theoretical derivation of the types of welfare states in modern developed capitalist nations (liberal, e.g., United States; corporatist-statist, e.g., Germany; and social democratic, e.g., Sweden); provides fuzzy sets that are, at best, less suited to empirical analysis. Classifications constructed using a “decommodification index” without sufficient information to reproduce the index from data.

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  • Esping-Andersen, Gøsta. Social Foundations of Post Industrial Economics. Oxford: Oxford University Press, 1999.

    DOI: 10.1093/0198742002.001.0001Save Citation »Export Citation »E-mail Citation »

    Analyzes contemporary welfare regimes through a discussion of institutional diversity and the role of the household in many countries.

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  • Fernandez, Raquel, and Richard Rogerson. “Income Distribution, Communities, and the Quality of Public Education.” Quarterly Journal of Economics 111.1 (February 1996): 135–164.

    DOI: 10.2307/2946660Save Citation »Export Citation »E-mail Citation »

    Analyzes policies that affect spending on public education and its distribution across communities. Policies that encourage redistribution and make the poorest community more attractive to relatively wealthy individuals produce a dynamic of increasing quality of education and falling tax rates with greater welfare for all.

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  • Kenworthy, Lane, and Jonas Pontusson. “Rising Inequality and the Politics of Redistribution in Affluent Countries.” Perspectives on Politics 3.3 (2005): 449–471.

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    Increases in market household inequality in most countries examined in the Luxembourg Income Study in the 1980s and 1990s were found to be driven by changes in employment. Redistribution as social welfare programs offset the rise in market inequality, producing a positive association between changes in market inequality and changes in the amount of redistribution.

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  • Mahler, Vincent A. “Government Inequality Reduction in Comparative Perspective: A Cross-National Analysis of the Developed World.” Polity 42.4 (2010): 511–541.

    DOI: 10.1057/pol.2010.14Save Citation »Export Citation »E-mail Citation »

    Finds consistent positive relationships between direct government redistribution and four variables: the extent of pre-government inequality, the level of electoral turnout, the share of the labor force that is unionized, and the presence of proportional representation electoral systems.

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  • Mahler, Vincent A., and David K. Jesuit. “Comparing Government Redistribution Across Countries: The Problem of Second-Order Effects.” Social Science Quarterly 91.5 (2010): 1390–1404.

    DOI: 10.1111/j.1540-6237.2010.00737.xSave Citation »Export Citation »E-mail Citation »

    Income guarantees arising from public pensions make it less necessary for people to save for their retirement, meaning that conventional measures overstate redistribution.

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  • Piketty, Thomas. “Social Mobility and Redistributive Politics.” Quarterly Journal of Economics 110.3 (1995): 551–584.

    DOI: 10.2307/2946692Save Citation »Export Citation »E-mail Citation »

    Offers a model in which individuals learn how much they would like to support increased social insurance but in which society can still become more fragmented over time.

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  • Rawls, John. A Theory of Justice. Cambridge, MA: Belknap, 1971.

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    A philosophical exploration of social welfare given an unequal distribution of resources showing that someone contemplating a random draw would prefer more redistribution.

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The Welfare State’s Insurance against Risky Events

The welfare state provides insurance not only against lifetime income risk in the form of inequality, but also against risky events such as disability or unemployment; the optimal design of these programs must balance benefits in a bad state of the world against “premiums” paid in a good state of the world, and even low-income individuals may not prefer greater benefits if they translate into higher premiums (Bound, et al. 2004). Most forms of social insurance both protect against risks and redistribute; redistributive taxation can also function as social insurance, as pointed out in Barr 2001, Sinn 1995, and Varian 1980. Bound, et al. 2004 develops an explicit approach to assessing optimal redistribution in a social insurance program. Chetty 2006 and Chetty 2009 argue that the effect of social insurance on consumption can be used to assess optimal levels of social insurance.

Support for Social Insurance

Unemployment and income risk is higher at lower incomes, but the risk is present in all income classes and is strongly associated with occupation and industry; cross-cutting risks induce wider political support for social insurance (Rehm 2008, Rehm 2009, Rehm 2011). Mares 2003 argues that workers in higher-risk industries band together to demand social insurance subsidized by lower-risk industries. Iversen and Soskice 2001 argues that risk of job loss is as important as income in explaining individual support for the welfare state. Citizens are thought to be more supportive of social insurance when they can band together with like people, as pointed out in Kristov, et al. 1992; Luttmer 2001; and Lupu and Pontusson 2011, so population heterogeneity and increasing inequality should decrease support.

  • Iversen, Torben, and David Soskice. “An Asset Theory of Social Policy Preferences.” American Political Science Review 95 (December 2001): 875–895.

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    Variation in trade exposure and relative factor endowments affect political interests; however, not only factor endowments, but the specificity of these factors determines preferences.

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  • Kristov, Lorenzo, Peter H. Lindert, and Robert McClelland. “Pressure Groups and Redistribution.” Journal of Public Economics 48.2 (1992): 135–163.

    DOI: 10.1016/0047-2727(92)90024-ASave Citation »Export Citation »E-mail Citation »

    Discusses endogenous pressure groups, which are formed of heterogeneous agents deciding which group to join and how much effort to expend on political activity in the presence of “social affinity” conditions that foster pressure group formation. Produces testable effects of growth rate and income distribution on progressive transfers, with some support in regressions for thirteen OECD countries, 1960–1981.

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  • Lupu, Noam, and Jonas Pontusson. “The Structure of Inequality and Demand for Redistribution.” American Political Science Review 105.2 (2011): 316–336.

    DOI: 10.1017/S0003055411000128Save Citation »Export Citation »E-mail Citation »

    Posits that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich. Data on redistribution and spending support the story, as does survey evidence on preferences for redistribution among middle-income voters.

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  • Luttmer, Erzo F. P. “Group Loyalty and the Taste for Redistribution.” Journal of Political Economy 109.3 (2001): 500–528.

    DOI: 10.1086/321019Save Citation »Export Citation »E-mail Citation »

    Individuals are less likely to support redistribution if more people in their community are recipients, but they are more likely to support redistribution if more people in their racial or ethnic group are recipients.

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  • Mares, Isabela. The Politics of Social Risk: Business and Welfare State Development. Cambridge, UK: Cambridge University Press, 2003.

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    Workers in higher-risk industries band together to demand social insurance subsidized by lower-risk industries.

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  • Rehm, Philipp. “Ballot Boxing: Partisan Politics and Labor Market Risks.” In Laid Off, Laid Low: Political and Economic Consequences of Employment Insecurity. Edited by Katherine Newman, 108–127. New York: Columbia University Press, 2008.

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    Labor market risks and perceived risk are as important for political participation and preferences as any other factor discussed in the literature.

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  • Rehm, Philipp. “Risks and Redistribution: An Individual-Level Analysis.” Comparative Political Studies 42.7 (2009): 855–881.

    DOI: 10.1177/0010414008330595Save Citation »Export Citation »E-mail Citation »

    Finds that risks by occupation are more important than risks by industry in explaining political opinion.

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  • Rehm, Philipp. “Social Policy by Popular Demand.” World Politics 63.2 (2011): 271–299.

    DOI: 10.1017/S0043887111000037Save Citation »Export Citation »E-mail Citation »

    Theoretical and empirical work showing that a more homogenous risk pool produces more generous social insurance benefits.

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Support for Social Insurance in the Face of Globalization

The determinants of support for social insurance require a slightly different interpretation in the face of global capital and labor markets and more open trade regimes. Cusack, et al. 2006 finds that risk exposure affects the perceptions of economic insecurity. Estevez-Abe, et al. 2001 argues that worker protections encourage workers to acquire specific skills, which enhances the ability of firms to compete internationally. Huber and Stephens 2001 describes how industrial democracies in a global economy produce different welfare states. Moene and Wallerstein 2001 shows that individual demand for insurance (as distinct from redistribution) depends on individual perception of labor market risk. Moene and Wallerstein 2003 finds that welfare spending that serves an insurance purpose declines as inequality increases. Taylor-Gooby, et al. 1999 find that survey responses imply an awareness that individuals must take greater responsibility as the welfare state does less. Walter 2010 finds that those who are differentially affected by globalization adopt different political positions. Luttmer and Singhal 2011 point out that attitudes persist across generations, even as migrants move across borders.

  • Cusack, Thomas, Torben Iversen, and Philipp Rehm. “Risks at Work: The Demand and Supply Sides of Government Redistribution.” Oxford Review Economic Policy 22.3 (2006): 365–389.

    DOI: 10.1093/oxrep/grj022Save Citation »Export Citation »E-mail Citation »

    Finds that the risk exposure of individuals in terms of skill specificity by occupation affects their perceptions of economic insecurity.

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  • Estevez-Abe, Margarita, Torben Iversen, and David Soskice. “Social Protection and the Formation of Skills: A Reinterpretation of the Welfare State.” In Varieties of Capitalism. Edited by Peter Hall and David Soskice, 145–183. Oxford: Oxford University Press, 2001.

    DOI: 10.1093/0199247757.001.0001Save Citation »Export Citation »E-mail Citation »

    Social protection, including job protection, unemployment benefits, income protection, public retraining programs, and industry subsidies, encourages workers to acquire firm- and industry-specific skills, which, in turn, enhances the ability of firms to compete in international markets.

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  • Huber, Evelyn, and John D. Stephens. Development and Crisis of the Welfare State: Parties and Policies in Global Markets. Chicago: University of Chicago Press, 2001.

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    Government by different parties in industrial democracies results in markedly different welfare states, with resultant differences in levels of poverty and inequality. Emphasizes the influence of political parties and labor movements and also focuses on the role of gender in political discourse.

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  • Luttmer, Erzo, and Monica Singhal. “Culture, Context, and the Taste for Redistribution.” American Economic Journal: Economic Policy 3.1 (2011): 157–179.

    DOI: 10.1257/pol.3.1.157Save Citation »Export Citation »E-mail Citation »

    Finds evidence of intergenerational transmission of the taste for redistribution using immigrants from different countries.

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  • Moene, Karl Ove, and Michael Wallerstein. “Inequality, Social Insurance, and Redistribution.” American Political Science Review 95.4 (2001): 859–874.

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    Notes that demand for insurance distinct from redistribution responds to perception of labor market risk.

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  • Moene, Karl Ove, and Michael Wallerstein. “Earnings Inequality and Welfare Spending: A Disaggregated Analysis.” World Politics 55 (July 2003): 485–516.

    DOI: 10.1353/wp.2003.0022Save Citation »Export Citation »E-mail Citation »

    A substantial share of welfare spending that serves an insurance purpose declines as inequality increases. A simple model of voting on redistributive insurance predicts exactly this pattern.

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  • Taylor-Gooby, Peter, Hartley Dean, Moira Munro, and Gillian Parker. “Risk and the Welfare State.” British Journal of Sociology 50.2 (1999): 177–194.

    DOI: 10.1080/000713199358707Save Citation »Export Citation »E-mail Citation »

    Examines perceptions and behavior of people buying or selling their homes or considering provision for long-term care needs in Britain. Individual responses imply that while an awareness exists that individuals must take greater responsibility as the welfare state does less, support for the continued provision and expansion of state welfare services remains.

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  • Walter, Stefanie. “Globalization and the Welfare State: Testing the Microfoundations of the Compensation Hypothesis.” International Studies Quarterly 54.2 (2010): 403–426.

    DOI: 10.1111/j.1468-2478.2010.00593.xSave Citation »Export Citation »E-mail Citation »

    Globalization losers and winners in Switzerland significantly differ with regard to their social policy preferences and their propensity to vote for left-wing parties.

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Size of the Welfare State

In addition to measuring individual support for functions of the welfare state, many authors have used measures of the size of the welfare state as an outcome measure of the political process, with the welfare state affected by public opinion or institutions. Brooks and Manza 2006 and Brooks and Manza 2007 find that public support for programs is associated with increased size of the welfare state. Pierson 2001 and Pierson 1994 describe how political institutions have worked to shrink the welfare state, which has led to increased inequality.

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