Specific Skills, Unemployment Risk, and Insurance: an Experimental Approach

John Ahlquist (UC San Diego)
Ben Ansell (Oxford)

Abstract : This article provides the first experimental analysis of the effects of unemployment risk and insurance on specific skills investment, using both laboratory and online samples. We find that, even in highly permissive contractual environments, more generous unemployment insurance leads to a greater level of investment in specific skills that risk becoming obsolete. Subjects who invest in acquiring these skills also work harder at the experimental task. We see weak evidence that skill investment responds to unemployment risk. We find no evidence that more generous unemployment insurance creates labor market frictions in the form of workers waiting longer to take a new job after unemployment.

Progressivity, Information, and Preferences

Asli Cansunar (University of Oxford)
Pablo Beramendi (Duke University)
Raymond Duch (University of Oxford)

Abstract : A critical insight emerging from the political behavior literature is that voters substantially vary in how much they know about politics. Specifically, recent work in political economy have documented citizens misperceive inequality, and these misperceptions matter significantly for preferences over redistribution. Empirical evidence shows that the extent to which individuals misperceive inequality varies considerably across nations. We argue and show formally that progressivity of the tax and transfer policies explains these variation. When progressivity is high, individuals are better informed about their position in the income distribution. Conversely, when progressivity is low, individuals are more likely to misperceive their position. We test these predictions across nations within a sample of advanced industrial democracies. Our findings indicate that the progressivity of the tax and transfer system is a significant determinant of the information gap regarding perceptions of inequality.

Income, Insurance and Support for Redistribution: an Experimental Approach

Karl Kahn (University of Oxford)
David Rueda (University of Oxford)

Abstract : Most distributive theories in political economy understand individuals to be motivated by material self-interest, often approximated by their current position in the income distribution. It has become increasingly common, however, to also conceptualise material self-interest inter-temporally. This approach extends the more direct focus on effects of contemporary relative income (as in Romer 1975 and Meltzer and Richard 1981) and opens the door to arguments about insurance and risk (as in Sinn 1995; Moene and Wallerstein 2001; Iversen and Soskice 2001; Rehm 2009), and about social mobility and life-cycle profiles (Benabou and Ok 2001; Haider and Solon 2006; Alesina and Giuliano 2011; Rueda and Stegmueller Forthcoming). Distinguishing between redistribution (in the present) and insurance (against something that could happen in the future), however, is theoretically and empirically challenging. In this paper, we propose that the effects of insurance motivations on support for redistribution are income dependent, and conditional on the design of the social insurance scheme. We distinguish our argument from other theoretical alternatives and explore its implications through an observational analysis of European Social Survey data and a laboratory experiment designed to separate the influence of redistribution and insurance motivations, conducted through the Nuffield Centre for Experimental Social Sciences (CESS) in the United Kingdom and Chile.