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Uncertainty and the Demand for Redistribution

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  • György Molnár

    ()
    (Institute of Economics, Hungarian Academy of Sciences)

  • Zsuzsa Kapitány

    ()
    (Institute of Economics, Hungarian Academy of Sciences)

Abstract

In this paper we focus on the connection between perception of the competitive pressure situation (unemployment, uncertainty, rising income and wealth inequalities, decreasing mobility) and demand for redistribution. Our context is Hungary, between 2000 and 2002. We identify some basic variables that have important effect on the individuals' preferences for redistribution, namely, uncertainty in actual and future income, and unemployment. Uncertainty raises the demand for redistribution even among the upwardly mobile people, and labour market status is also a major element of dissatisfaction and demand for redistribution. The most frustrated and indecisive people are those who have no clear knowledge about the immediate and the distant future. Indecisive people favour redistribution more than those with negative expectations. Past personal experience and the expectation for future income have a very strong effect on the formation of thinking about income redistribution. Even those who are currently mobile in income tend to support redistribution if they are expecting a decline in their future income and welfare. According to the POUM hypothesis, we also found a negative correlation between expected intergenerational mobility and individual support for redistribution. People perceive their relative income position, their relative mobility and inequality in different ways and their demand for redistribution substantially depends on the subjective and not on the objective income position. Concerning perception of changes in inequality, we found that the more people feel that inequalities are increasing, the more they favour redistribution policies.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0608.

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Date of creation: 30 Aug 2006
Date of revision: 30 Aug 2006
Handle: RePEc:has:discpr:0608

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Keywords: Mobility; Subjective Mobility; POUM; Subjective Well-being; Redistribution;

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  1. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
  2. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
  3. 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.
  4. Benabou, Roland & Tirole, Jean, 2004. "Belief in a Just World and Redistributive Politics," Papers 08-15-2005a, Princeton University, Research Program in Political Economy.
  5. Roland Bénabou & Efe A. Ok, 2000. "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Working Papers 150, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  6. 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.
  7. Alberto Alesina & George-Marios Angeletos, 2004. "Fairness and Redistribution," NajEcon Working Paper Reviews 122247000000000306, www.najecon.org.
  8. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
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