Income, Insurance and Support for Redistribution: an Experimental Approach

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.