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Modelling Heterogeneous Preferences for Income Redistribution–An Application of Continuous and Discrete Distributions

Christian Pfarr, Andreas Schmid () and Morten Raun Mørkbak

Review of Income and Wealth, 2018, vol. 64, issue 2, 270-294

Abstract: This paper investigates observable and unobservable heterogeneity in individuals’ preferences for redistribution—differentiating the desired overall volume of redistribution and who should receive benefits, subsidies, or transfers. We use data from a discrete choice experiment (DCE) conducted in the field and based on a representative sample of the German voting†age population. Applying random parameters and latent class models, our results show that latent and potentially discontinuously distributed factors must be accounted for, as they heavily impact the interpretation of the findings. We find considerable heterogeneity in redistribution preferences, clearly identifying three distinct subgroups. While all groups are in favor of redistribution, they differ regarding the preferred allocation of the redistributive budget.

Date: 2018
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Handle: RePEc:bla:revinw:v:64:y:2018:i:2:p:270-294