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Consumption smoothing and income redistribution

Listed author(s):
  • 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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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. Giuseppe Bertola, 2004. "A Pure Theory of Job Security and Labour Income Risk," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 43-61.
  2. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  3. Roland Benabou & Efe A. Ok, 1998. "Social Mobility and the Demand for Redistribution: The POUM Hypothesis," NBER Working Papers 6795, National Bureau of Economic Research, Inc.
  4. Botero, J. C. & Djankov, S. & Porta, R. L. & Lopez-de-Silanes, F. & Shleifer, Andrei, 2004. "The Regulation of Labor," Scholarly Articles 27867241, Harvard University Department of Economics.
  5. 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.
  6. 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.
  7. 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.
  8. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  9. Tito Boeri & Herbert Brücker, 2005. "Why are Europeans so tough on migrants?," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 629-703, October.
  10. Agell, Jonas, 2001. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," Research Papers in Economics 2001:12, Stockholm University, Department of Economics.
  11. Grant, Charles & Koeniger, Winfried, 2005. "Redistributive Taxation and Personal Bankruptcy in US States," IZA Discussion Papers 1805, Institute for the Study of Labor (IZA).
  12. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  13. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  14. Winfried Koeniger, 2004. "Labor Income Risk and Car Insurance in the UK," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 29(1), pages 55-74, 06.
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