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Consumption smoothing and income redistribution

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  • Bertola, Giuseppe
  • Koeniger, Winfried

Abstract

We show theoretically that income redistribution benefits borrowing-constrained individuals more than is implied by standard relative-income and uninsurable-risk considerations. Empirically, we find in international opinion-survey data that younger and lower-income individuals express stronger support for government redistribution in countries where consumer credit is less easily available. This evidence supports our theoretical perspective if such individuals are more strongly affected by tighter credit supply, in that expectations of higher incomes in the future increase their propensity to borrow.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 8 (November)
Pages: 1941-1958

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:8:p:1941-1958

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  1. Winfried Koeniger, 2004. "Labor Income Risk and Car Insurance in the UK," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 29(1), pages 55-74, June.
  2. Bertola, Giuseppe, 2002. "A Pure Theory of Job Security and Labour Income Risk," CEPR Discussion Papers 3430, C.E.P.R. Discussion Papers.
  3. Roland Bénabou & Efe A. Ok, 2001. "Social Mobility And The Demand For Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 447-487, May.
  4. Alesina, Alberto F & La Ferrara, Eliana, 2002. "Preferences for Redistribution in the Land of Opportunities," CEPR Discussion Papers 3155, C.E.P.R. Discussion Papers.
  5. Jonas Agell, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 107-135, 05.
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  7. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
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  12. Mayda, Anna Maria & Rodrik, Dani, 2005. "Why are some people (and countries) more protectionist than others?," European Economic Review, Elsevier, vol. 49(6), pages 1393-1430, August.
  13. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  14. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  15. Tito Boeri & Herbert Brücker, 2005. "Why are Europeans so tough on migrants?," Economic Policy, CEPR & CES & MSH, vol. 20(44), pages 629-703, October.
  16. Charles Grant & Winfried Koeniger, 2009. "Redistributive Taxation and Personal Bankruptcy in U.S. States," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 445-467, 08.
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Cited by:
  1. Bertola, Giuseppe & Lo Prete, Anna, 2008. "Openness, financial markets, and policies: Cross-country and dynamic patterns," CFS Working Paper Series 2008/55, Center for Financial Studies (CFS).
  2. Caterina Giannetti & Marianna Madia & Luigi Moretti, 2014. "Job insecurity and financial distress," Applied Financial Economics, Taylor & Francis Journals, vol. 24(4), pages 219-233, February.
  3. Merkl, Christian & Schmitz, Tom, 2011. "Macroeconomic volatilities and the labor market: First results from the euro experiment," European Journal of Political Economy, Elsevier, vol. 27(1), pages 44-60, March.
  4. Bertola, Giuseppe, 2007. "Finance and welfare states in globalizing markets," CFS Working Paper Series 2007/31, Center for Financial Studies (CFS).
  5. Bertola, Giuseppe & Lo Prete, Anna, 2013. "Finance, Governments, and Trade," CEPR Discussion Papers 9338, C.E.P.R. Discussion Papers.
  6. Giuseppe Bertola, 2008. "Labour Markets in EMU - What has changed and what needs to change," European Economy - Economic Papers 338, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Bertola, Giuseppe & Lo Prete, Anna, 2010. "Whence Policy? Government Policies, Finance, and Economic Integration," CEPR Discussion Papers 7820, C.E.P.R. Discussion Papers.

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