Consumption Smoothing and Income Redistribution

Giuseppe Bertola and Winfried Koeniger

No 6051, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We show theoretically that income redistribution benefits borrowing-constrained individuals more than is implied by standard relative-income and uninsurable-risk considerations. Empirically, we find in international opinion-survey data that younger and lower-income individuals express stronger support for government redistribution in countries where consumer credit is less easily available. This evidence supports our theoretical perspective if such individuals are more strongly affected by tighter credit supply, in that expectations of higher incomes in the future increase their propensity to borrow.

Keywords: Borrowing constraints; Consumer credit (search for similar items in EconPapers)
JEL-codes: D23 E21 (search for similar items in EconPapers)
Date: 2007-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (17)

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Journal Article: Consumption smoothing and income redistribution (2007)
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