Intergenerational earnings persistence and the provision of public goods: evidence from chile’s constitutional process

Javier Cortes Orihuela (), Juan D. Díaz (), Pablo Gutiérrez Cubillos () and Pablo Troncoso
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Javier Cortes Orihuela: University of British Columbia
Juan D. Díaz: Faculty of Economics and Business, University of Chile
Pablo Gutiérrez Cubillos: Faculty of Economics and Business, University of Chile
Authors registered in the RePEc Author Service: Pablo A. Gutiérrez C.

The Journal of Economic Inequality, 2023, vol. 21, issue 1, No 3, 47-81

Abstract: Abstract This paper studies the relationship between intergenerational economic persistence and preferences for the provision of public goods. Specifically, we develop a simple theoretical model in which a public good is financed through proportional taxation, and that predicts a lower provision of public goods given an increase in the intergenerational earnings elasticity (IGE), which is widely recognized as a measure of the degree of economic persistence from one generation to the next in society. We test this model empirically using the results of the 2020 Chilean national plebiscite, which asked about the replacement of the standing constitution by a new one that would potentially expand the role of the state in the provision of public goods. Our estimates suggest the existence of a positive association between the IGE and the share of the vote against a new constitution, even after controlling for median income and income inequality. These findings are consistent with our model and suggest that sectors of society that exhibit higher degrees of economic persistence also show greater reluctance towards redistributive policies that increase public goods provision.

Keywords: Intergenerational mobility; Social outbreak; Publicly provided goods; Proportional taxation; Referendum (search for similar items in EconPapers)
JEL-codes: D72 J61 J62 P16 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10888-022-09555-5

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