What kind of Welfare State do you prefer? An experiment on framing the social insurance scheme

Francesco Farina, Stefania Ottone and Ferrucio Ponzano

No 295, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: A real-effort experiment is conducted in order to detect preferences for one of three different models of Welfare State characterized by different schemes of tax-and-transfers. Experimental subjects have to choose (both under and without veil of ignorance concerning their position in the society created in the lab) among: a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; b) an actuarially-fair scheme where low-ability and low-earnings subjects bear individual full responsibility for risk exposure; c) a progressive scheme where mutual risk insurance spreads risk across all subjects, so that low-ability and low-earnings individuals are compensated. The aim is to investigate how subjects posit with respect to the task performed by the Welfare State, which is the interaction between inequality of opportunity and income inequality facing low-ability and low-earnings individuals due to their relatively higher risk exposure. Our most relevant finding is that preference is not much motivated by a justice principle, but mainly by the expectation on one’s own position in the society.

Keywords: Welfare State; insurance; redistribution; proportional system; actuarially-fair system; progressive system (search for similar items in EconPapers)
JEL-codes: C9 D31 D63 H26 (search for similar items in EconPapers)
Pages: 35
Date: 2015-03, Revised 2015-03
New Economics Papers: this item is included in nep-exp and nep-ias
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