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Consumption smoothing and income redistribution

  • Bertola, Giuseppe
  • Koeniger, Winfried

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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File URL: http://www.sciencedirect.com/science/article/B6V64-4NCK2CR-1/2/79631ecb31e369ecaa3eee627fa2d27c
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Tito Boeri & Herbert Brücker, 2005. "Why are Europeans so tough on migrants?," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 629-703, October.
  2. Bertola, Giuseppe, 2002. "A Pure Theory of Job Security and Labour Income Risk," CEPR Discussion Papers 3430, C.E.P.R. Discussion Papers.
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  4. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  5. Juan Botero & Simeon Djankov & Rafael LaPorta & Florencio López-de-Silanes & Andrei Shleifer, . "The Regulation of Labor," Working Paper 19483, Harvard University OpenScholar.
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  8. Mayda, Anna Maria & Rodrik, Dani, 2001. "Why are Some People (and Countries) More Protectionist than Others?," CEPR Discussion Papers 2960, C.E.P.R. Discussion Papers.
  9. Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers 21, California Los Angeles - Applied Econometrics.
  10. Alberto Alesina & Eliana La Ferrara, 2001. "Preferences for Redistribution in the Land of Opportunities," NBER Working Papers 8267, National Bureau of Economic Research, Inc.
  11. Bénabou, Roland & Ok, Efe A, 1998. "Social Mobility and the Demand for Redistribution: the POUM Hypothesis," CEPR Discussion Papers 1955, C.E.P.R. Discussion Papers.
  12. Acemoglu, D. & Shimer, R., 1997. "Efficient Unemployment Insurance," Working papers 97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. repec:iza:izadps:dp1805 is not listed on IDEAS
  14. Winfried Koeniger, 2004. "Labor Income Risk and Car Insurance in the UK," The Geneva Papers on Risk and Insurance Theory, Springer, vol. 29(1), pages 55-74, 06.
  15. 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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