Redistributive politics with target-specific beliefs
Christina Fong and
Panu Poutvaara ()
No 297, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich
Forty-two percent of Americans give different answers when asked, respectively, about the reasons for being rich and the reasons for being poor. We develop and test a theo-ry about support for redistribution in the presence of target-specific beliefs about the causes of low and high incomes. Our theory predicts that target-specific beliefs about the poor matter most for preferences about transfers to the poor, and target-specific beliefs about the rich matter most for preferences about taxation of the rich. Survey evidence from the United States and Germany and experimental evidence on giving money to real welfare recipients supports our theory. We also find, in theory, the ex-istence of a moral release equilibrium in which the rich choose high taxes on lower income classes to discourage effort and create an unworthy poor class, thereby escap-ing moral pressure to support the poor.
Keywords: redistribution; fairness; taxation; political economy; moral release equilibrium; target-specific beliefs (search for similar items in EconPapers)
JEL-codes: D63 D72 H21 H24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-hpe and nep-pol
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