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Group Loyalty and the Taste for Redistribution

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Author Info
Erzo F.P. Luttmer

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Abstract

Interpersonal preferences - preferences that depend on the characteristics of others - are typically hard to infer from observable individual behavior. As an alternative approach, this paper uses survey data to investigate interpersonal preferences. The General Social Survey contains self-reported preferences for welfare spending, which I validate with voting behavior on cuts in welfare benefits. Using this preference measure, I show that preferences for income redistribution are not only determined by financial self-interest but also by interpersonal preferences. These interpersonal preferences are characterized by a negative exposure effect - individuals decrease their support for welfare if there are more welfare recipients in their area - and racial group loyalty - individuals increase their support for welfare spending if a larger fraction of welfare recipients in their area belongs to their racial group. My results hold when areas are defined as states, metropolitan areas or census tracts and are robust.

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Publisher Info
Paper provided by Harris School of Public Policy Studies, University of Chicago in its series Working Papers with number 9902.

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Date of creation: Jan 1999
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Handle: RePEc:har:wpaper:9902

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Related research
Keywords: interdependent preferences; altruism; income redistribution; race; welfare; AFDC;

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References listed on IDEAS
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  1. Robert Moffitt & David Ribar & Mark Wilhelm, 1998. "The Decline of Welfare Benefits in the US: The Role of Wage Inequality," Economics Working Paper Archive 373, The Johns Hopkins University,Department of Economics.
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  2. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June. [Downloadable!] (restricted)
  4. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, vol. 66(3), pages 359-71, June. [Downloadable!] (restricted)
  5. Ribar, David C & Wilhelm, Mark O, 1996. "Welfare Generosity: The Importance of Administrative Efficiency, Community Values, and Genuine Benevolence," Applied Economics, Taylor and Francis Journals, vol. 28(8), pages 1045-54, August. [Downloadable!] (restricted)
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  6. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February. [Downloadable!] (restricted)
  7. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June. [Downloadable!] (restricted)
  8. David M. Cutler & Douglas W. Elmendorf & Richard J. Zeckhauser, 1993. "Demographic Characteristics and the Public Bundle," NBER Working Papers 4283, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
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  10. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
  11. Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March. [Downloadable!] (restricted)
  13. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-71, September. [Downloadable!] (restricted)
  14. Joseph G. Altonji & Fumio Hayashi & Laurence Kotlikoff, 1995. "Parental Altruism and Inter Vivos Transfers: Theory and Evidence," NBER Working Papers 5378, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February. [Downloadable!] (restricted)
  16. Thurow, Lester C, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, MIT Press, vol. 85(2), pages 327-36, May. [Downloadable!] (restricted)
  17. Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, vol. 59(4), pages 542-57, Part I Se. [Downloadable!] (restricted)
  18. Cutler, David M & Glaeser, Edward L, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 827-72, August.
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  19. Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October. [Downloadable!] (restricted)
  20. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December. [Downloadable!] (restricted)
  21. Blank, Rebecca M., 1988. "The effect of welfare and wage levels on the location decisions of female-headed households," Journal of Urban Economics, Elsevier, vol. 24(2), pages 186-211, September. [Downloadable!] (restricted)
  22. Feldstein, Martin & Wrobel, Marian Vaillant, 1998. "Can state taxes redistribute income?," Journal of Public Economics, Elsevier, vol. 68(3), pages 369-396, June. [Downloadable!] (restricted)
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  23. Benabou, Roland, 1996. "Heterogeneity, Stratification, and Growth: Macroeconomic Implications of Community Structure and School Finance," American Economic Review, American Economic Association, vol. 86(3), pages 584-609, June. [Downloadable!] (restricted)
  24. Samuel Bowles & Herbert Gintis, 2000. "Reciprocity, Self-Interest and the Welfare State," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 26, pages 33-53. [Downloadable!]
  25. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September. [Downloadable!] (restricted)
  26. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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