Why does the amount of income redistribution differ between the United States and Europe? The Janus face of Switzerland

In this paper, the amount of income redistribution in the United States, the European Union, and in Switzerland is compared and empirically related to economic, political, and behavioral determinants elaborated in the literature. Lying in between the two poles, data on Switzerland provides evidence about the relative merits of competing hypotheses. It tips the balance against the economic explanation, which predicts more rather than less income redistribution in the United States compared to the EU in general. It only weakly supports the political model linking proportional representation and multiparty structure (which also characterize Switzerland) to redistribution; yet the Swiss share of transfers in the GDP is low. Behavioral explanations receive a good deal of support from the case of Switzerland, two countries that share with the United States the belief that hard work rather than luck, birth, connections, and corruption determine wealth. In this way, the Janus faces of Switzerland may help to explain the difference in the amount of U.S. and EU income redistribution