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Work Values, Endogenous Sentiments and Redistribution

  • Matteo Cervellati
  • Joan Esteban
  • Laurence Kranich

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.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 434.

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Date of creation: Feb 2010
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Handle: RePEc:bge:wpaper:434
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