Equalizing Incomes in the Future: Why Structural Differences in Social Insurance Matter for Redistribution Preferences

Verena Fetscher
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Verena Fetscher: University of Hamburg

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: Why is support for income redistribution among the rich higher in some Western European welfare states than in others? The argument I propose builds on structural differences in the social insurance design. Flat-rate systems provide social benefits in equal amounts to everyone in need, while earnings-related systems provide benefits in relation to previous earnings. These differences in the configuration of the welfare state historically go back to Bismarck and Beveridge and have implications for questions of distributive justice and fairness. If individual incomes have fair and unfair components, earnings-related systems maintain both components during periods of economic hardship, while flat-rate systems equalize fair and unfair income differences. With a combination of observational and experimental data, I show that average support for redistribution among the better-off is higher in earnings-related systems and participants in a laboratory experiment increase transfer shares in allocation problms which maintain given endowment differences

Date: 2020
New Economics Papers: this item is included in nep-exp, nep-ias and nep-pbe
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