Income inequality and social preferences for redistribution and compensation differentials

William Kerr

No 31/2013, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe). If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change. Exploring movements around these long-term levels, however, this study finds mixed evidence regarding the vicious cycle hypothesis. On one hand, larger compensation differentials are accepted as inequality grows. This growth in differentials is of a smaller magnitude than the actual increase in inequality, but it is nonetheless positive and substantial in size. Weighing against this, growth in inequality is met with greater support for government-led redistribution to the poor. These patterns suggest that short-run inequality shocks can be reinforced in the labor market but do not result in weaker political preferences for redistribution.

Keywords: Inequality; Social Preferences; Social Norms; Redistribution; Welfare; Class Warfare (search for similar items in EconPapers)
JEL-codes: D31 D33 D61 D63 D64 D72 H23 H53 I38 J31 R11 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/212271/1/bof-rdp2013-031.pdf (application/pdf)

Related works:
Journal Article: Income inequality and social preferences for redistribution and compensation differentials (2014)
Working Paper: Income Inequality and Social Preferences for Redistribution and Compensation Differentials (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2013_031

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().