IDEAS home Printed from https://ideas.repec.org/p/bge/wpaper/434.html
   My bibliography  Save this paper

Work Values, Endogenous Sentiments and Redistribution

Author

Listed:
  • Matteo Cervellati
  • Joan-Maria Esteban
  • Laurence Kranich

Abstract

We examine the interactions between individual behavior, sentiments and the social contract in a model of rational voting over redistribution. Agents have moral "work values". Individuals' self-esteem and social consideration of others are endogenously determined comparing behaviors to moral standards. Attitudes toward redistribution depend on self-interest and social preferences. We characterize the politico-economic equilibria in which sentiments, labor supply and redistribution are determined simultaneously. The equilibria feature different degrees of "social cohesion" and redistribution depending on pre-tax income inequality. In clustered equilibria the poor are held partly responsible for their low income since they work less than the moral standard and hence redistribution is low. The paper proposes a novel explanation for the emergence of different sentiments and social contracts across countries. The predictions appear broadly in line with well-documented differences between the United States and Europe.

Suggested Citation

  • Matteo Cervellati & Joan-Maria Esteban & Laurence Kranich, 2010. "Work Values, Endogenous Sentiments and Redistribution," Working Papers 434, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:434
    as

    Download full text from publisher

    File URL: https://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/434.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 1-35.
    2. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June.
    3. Assar Lindbeck & Sten Nyberg, 2006. "Raising Children to Work Hard: Altruism, Work Norms, and Social Insurance," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1473-1503.
    4. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
    5. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    6. Bowles, Samuel & Hwang, Sung-Ha, 2008. "Social preferences and public economics: Mechanism design when social preferences depend on incentives," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1811-1820, August.
    7. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
    8. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
    9. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    10. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
    11. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
    12. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, vol. 83(1), pages 83-107, January.
    13. Christina M. Fong & Erzo F. P. Luttmer, 2009. "What Determines Giving to Hurricane Katrina Victims? Experimental Evidence on Racial Group Loyalty," American Economic Journal: Applied Economics, American Economic Association, vol. 1(2), pages 64-87, April.
    14. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    15. Besley, Timothy & Coate, Stephen, 1992. "Understanding welfare stigma: Taxpayer resentment and statistical discrimination," Journal of Public Economics, Elsevier, vol. 48(2), pages 165-183, July.
    16. Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent-Seeking," Economics and Politics, Wiley Blackwell, vol. 16, pages 287-320, November.
    17. Christina M. Fong, 2007. "Evidence from an Experiment on Charity to Welfare Recipients: Reciprocity, Altruism and the Empathic Responsiveness Hypothesis," Economic Journal, Royal Economic Society, vol. 117(522), pages 1008-1024, July.
    18. Snyder, James M. & Kramer, Gerald H., 1988. "Fairness, self-interest, and the politics of the progressive income tax," Journal of Public Economics, Elsevier, vol. 36(2), pages 197-230, July.
    19. International Monetary Fund, 2003. "Income Inequality and Redistributive Government Spending," IMF Working Papers 2003/014, International Monetary Fund.
    20. Brekke, Kjell Arne & Kverndokk, Snorre & Nyborg, Karine, 2003. "An economic model of moral motivation," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1967-1983, September.
    21. Lane Kenworthy & Jonas Pontusson, 2005. "Rising Inequality and the Politics of Redistribution in Affluent Countries," LIS Working papers 400, LIS Cross-National Data Center in Luxembourg.
    22. Roemer, John E., 1998. "Why the poor do not expropriate the rich: an old argument in new garb," Journal of Public Economics, Elsevier, vol. 70(3), pages 399-424, December.
    23. Bruno S. Frey & Reto Jegen, 2001. "Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    24. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    25. Kevin Murdock, 2002. "Intrinsic Motivation and Optimal Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 650-671, Winter.
    26. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
    27. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
    28. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
    29. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
    30. Kranich, Laurence, 2001. "Altruism and the Political Economy of Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 455-469.
    31. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    32. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
    33. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
    34. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 905-950.
    35. 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 914-927, October.
    36. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
    37. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
    38. Shayo, Moses, 2009. "A Model of Social Identity with an Application to Political Economy: Nation, Class, and Redistribution," American Political Science Review, Cambridge University Press, vol. 103(2), pages 147-174, May.
    39. Luiz de Mello & Erwin R. Tiongson, 2006. "Income Inequality and Redistributive Government Spending," Public Finance Review, , vol. 34(3), pages 282-305, May.
    40. Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent‐Seeking," Economics and Politics, Wiley Blackwell, vol. 16(3), pages 287-320, November.
    41. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    42. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    43. Alesina, Alberto & Giuliano, Paola, 2009. "Preferences for Redistribution," IZA Discussion Papers 4056, Institute of Labor Economics (IZA).
    44. Roland Bénabou & Jean Tirole, 2002. "Self-Confidence and Personal Motivation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 871-915.
    45. F. C. Rodrigìuez, 1999. "Does Distributional Skewness Lead to Redistribution? Evidence from the United States," Economics and Politics, Wiley Blackwell, vol. 11(2), pages 171-199, July.
    46. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-364, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cervellati, Matteo & Vanin, Paolo, 2013. "“Thou shalt not covet”: Prohibitions, temptation and moral values," Journal of Public Economics, Elsevier, vol. 103(C), pages 15-28.
    2. Robin Boadway & Nicolas-Guillaume Martineau, 2013. "Normative Analysis with Societal Constraints," CESifo Working Paper Series 4305, CESifo.
    3. Riccardo Ghidoni & Matteo Ploner, 2014. "When do the Expectations of Others Matter? An Experiment on Distributional Justice and Guilt Aversion," CEEL Working Papers 1403, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    4. Corneo, Giacomo, 2013. "Work norms, social insurance and the allocation of talent," Journal of Public Economics, Elsevier, vol. 107(C), pages 79-92.
    5. Garance Genicot, 2019. "Tolerance and Compromise in Social Networks," NBER Working Papers 25506, National Bureau of Economic Research, Inc.
    6. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," Sciences Po publications 2014-20, Sciences Po.
    7. S. Bowles & S. Polania-Reyes., 2013. "Economic Incentives and Social Preferences: Substitutes or Complements?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
    8. Corneo, Giacomo & Neher, Frank, 2015. "Democratic redistribution and rule of the majority," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 96-109.
    9. Gilles Le Garrec, 2018. "Fairness, social norms and the cultural demand for redistribution," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(2), pages 191-212, February.
    10. Erik Schokkaert & Tom Truyts, 2017. "Preferences for redistribution and social structure," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 545-576, December.
    11. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    12. repec:aia:ginidp:dp17 is not listed on IDEAS
    13. Luna Bellani & Heinrich Ursprung, 2016. "The Political Economy of Redistribution Policy," CESifo Working Paper Series 6189, CESifo.
    14. Corneo, Giacomo, 2012. "Social insurance, work norms, and the allocation of talent," CEPR Discussion Papers 9028, C.E.P.R. Discussion Papers.
    15. Giacomo Corneo, 2011. "GINI DP 17: Income Inequality, Value Systems and Macroeconomic Performance," GINI Discussion Papers 17, AIAS, Amsterdam Institute for Advanced Labour Studies.
    16. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    17. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo.
    18. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," Documents de Travail de l'OFCE 2014-20, Observatoire Francais des Conjonctures Economiques (OFCE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cervellati, Matteo & Esteban, Joan & Kranich, Laurence, 2010. "Work values, endogenous sentiments redistribution," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 612-627, October.
    2. Joan Esteban & Laurence Kranich, 2003. "The Social Contracts with Endogenous Sentiments," Working Papers 71, Barcelona Graduate School of Economics.
    3. Gilles Le Garrec, 2011. "Redistribution and the cultural transmission of the taste for fairness," Documents de Travail de l'OFCE 2011-24, Observatoire Francais des Conjonctures Economiques (OFCE).
    4. Corneo, Giacomo & Neher, Frank, 2015. "Democratic redistribution and rule of the majority," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 96-109.
    5. Gilles le Garrec, 2009. "Feeling guilty and redistributive politics," Documents de Travail de l'OFCE 2009-22, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Neher, Frank, 2012. "Preferences for redistribution around the world," Discussion Papers 2012/2, Free University Berlin, School of Business & Economics.
    7. Andreas Georgiadis & Alan Manning, 2012. "Spend it like Beckham? Inequality and redistribution in the UK, 1983–2004," Public Choice, Springer, vol. 151(3), pages 537-563, June.
    8. Holger Stichnoth, 2012. "Does immigration weaken natives’ support for the unemployed? Evidence from Germany," Public Choice, Springer, vol. 151(3), pages 631-654, June.
    9. Pfarr Christian & Ulrich Volker, 2011. "Discrete-Choice-Experimente zur Ermittlung der Präferenzen für Umverteilung," Review of Economics, De Gruyter, vol. 62(3), pages 232-262, December.
    10. Neher, Frank, 2012. "Preferences for Redistribution around the World," Working Papers 26/2012, Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE).
    11. Sanghamitra Bandyopadhyay & Joan Esteban, 2007. "Redistributive Taxation and PublicExpenditures," STICERD - Distributional Analysis Research Programme Papers 95, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    12. Gilles Le Garrec, 2018. "Fairness, social norms and the cultural demand for redistribution," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(2), pages 191-212, February.
    13. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," Documents de Travail de l'OFCE 2014-20, Observatoire Francais des Conjonctures Economiques (OFCE).
    14. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09iak4384sp is not listed on IDEAS
    15. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," Sciences Po publications 2014-20, Sciences Po.
    16. Le Garrec, Gilles, 2013. "Guilt aversion and redistributive politics: A moral intuitionist approach," Economics Discussion Papers 2013-53, Kiel Institute for the World Economy (IfW).
    17. Luna Bellani & Heinrich Ursprung, 2016. "The Political Economy of Redistribution Policy," CESifo Working Paper Series 6189, CESifo.
    18. Klor, Esteban F. & Shayo, Moses, 2010. "Social identity and preferences over redistribution," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 269-278, April.
    19. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09hacc56d41 is not listed on IDEAS
    20. Ilja Neustadt & Peter Zweifel, 2010. "Is the Welfare State Sustainable? Experimental Evidence on Citizens’ Preferences for Redistribution," SOI - Working Papers 1003, Socioeconomic Institute - University of Zurich.
    21. Großer, Jens & Reuben, Ernesto, 2013. "Redistribution and market efficiency: An experimental study," Journal of Public Economics, Elsevier, vol. 101(C), pages 39-52.
    22. Joan Costa-Font & Frank Cowell, 2015. "Social Identity And Redistributive Preferences: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 357-374, April.

    More about this item

    Keywords

    social contract; Endogenous Sentiments; Voting over Taxes; Moral Work Values;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:434. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/bargses.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bruno Guallar (email available below). General contact details of provider: https://edirc.repec.org/data/bargses.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.