IDEAS home Printed from https://ideas.repec.org/p/cge/wacage/228.html
   My bibliography  Save this paper

Risk, Recession, and Declining Popular Demand for the Welfare State

Author

Listed:
  • Barnes, Lucy

    (University of Kent)

  • Hicks, Timothy

    (University College London)

Abstract

How do individual preferences over welfare spending respond to economic hard times? In this paper we reconcile two prominent, opposing expectations : that recessions lead to a `hunkering down' such that individuals become less favorable to taxation and expenditure; and that downturns, being associated with increases in risk, should lead to increased demand for government expenditure. We present a simple formal model rooted in the risk/insurance literature, to demonstrate that these two intuitions both capture important effects. While the labor market risk literature correctly predicts that individual-level insecurity increases support for welfare expenditure, our model shows that it also predicts that poor macroeconomic performance has the opposite e ect. The government budget constraint links the two levels, and we demonstrate that concern about budget balance is the mechanism driving declines in support for tax-and-spend. We test our argument using British individual-level panel data from before and during the Great Recession, and use Eurobarometer data from 32 countries to probe our de cit-based mechanism. The evidence is supportive of our claims on both counts.

Suggested Citation

  • Barnes, Lucy & Hicks, Timothy, 2015. "Risk, Recession, and Declining Popular Demand for the Welfare State," CAGE Online Working Paper Series 228, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:228
    as

    Download full text from publisher

    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/228-2015_barnes_troeger.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Margalit, Yotam, 2013. "Explaining Social Policy Preferences: Evidence from the Great Recession," American Political Science Review, Cambridge University Press, vol. 107(1), pages 80-103, February.
    2. Moene, Karl Ove & Wallerstein, Michael, 2001. "Inequality, Social Insurance, and Redistribution," American Political Science Review, Cambridge University Press, vol. 95(4), pages 859-874, December.
    3. Ansell, Ben, 2014. "The Political Economy of Ownership: Housing Markets and the Welfare State," American Political Science Review, Cambridge University Press, vol. 108(2), pages 383-402, May.
    4. Thomas Cusack & Torben Iversen & Philipp Rehm, 2006. "Risks at Work: The Demand and Supply Sides of Government Redistribution," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(3), pages 365-389, Autumn.
    5. Raj Chetty, 2006. "A New Method of Estimating Risk Aversion," American Economic Review, American Economic Association, vol. 96(5), pages 1821-1834, December.
    6. Rehm, Philipp & Hacker, Jacob S. & Schlesinger, Mark, 2012. "Insecure Alliances: Risk, Inequality, and Support for the Welfare State," American Political Science Review, Cambridge University Press, vol. 106(2), pages 386-406, May.
    7. Soroka, Stuart N. & Wlezien, Christopher, 2005. "Opinion–Policy Dynamics: Public Preferences and Public Expenditure in the United Kingdom," British Journal of Political Science, Cambridge University Press, vol. 35(4), pages 665-689, October.
    8. Alberto Alesina & Guido Tabellini, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 403-414.
    9. Iversen, Torben & Soskice, David, 2001. "An Asset Theory of Social Policy Preferences," American Political Science Review, Cambridge University Press, vol. 95(4), pages 875-893, December.
    10. 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.
    11. Kathleen Bawn & Frances Rosenbluth, 2006. "Short versus Long Coalitions: Electoral Accountability and the Size of the Public Sector," American Journal of Political Science, John Wiley & Sons, vol. 50(2), pages 251-265, April.
    12. Moene, Karl O. & Wallerstein, Michael, 2003. "Income Inequality and Welfare spending: A disaggregated Analysis," Memorandum 18/2003, Oslo University, Department of Economics.
    13. Durr, Robert H., 1993. "What Moves Policy Sentiment?," American Political Science Review, Cambridge University Press, vol. 87(1), pages 158-170, March.
    14. Bell, Andrew & Jones, Kelvyn, 2015. "Explaining Fixed Effects: Random Effects Modeling of Time-Series Cross-Sectional and Panel Data," Political Science Research and Methods, Cambridge University Press, vol. 3(1), pages 133-153, January.
    Full references (including those not matched with items on IDEAS)

    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. Vlandas, Tim & Weisstanner, David, 2022. "Income Stagnation and the Politics of Welfare State Retrenchment in Advanced Economies," SocArXiv 862ua, Center for Open Science.
    2. Elvire Guillaud, 2013. "Preferences for redistribution: an empirical analysis over 33 countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 57-78, March.
    3. Yeandle, Alex & Green, Jane & Le Corre, Tiphaine, 2024. "Economic hardship and support for redistribution: synthesising five themes in the literature," LSE Research Online Documents on Economics 125294, London School of Economics and Political Science, LSE Library.
    4. Elvire Guillaud, 2008. "Preferences for redistribution: a European comparative analysis," Working Papers halshs-00586260, HAL.
    5. Baptiste Françon, 2013. "Who turned their back on the SPD? Electoral disaffection with the German Social Democratic Party and the Hartz reforms," Documents de travail du Centre d'Economie de la Sorbonne 14019, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. repec:hal:pseose:halshs-00586260 is not listed on IDEAS
    7. Erling Barth & Karl O. Moene, 2009. "The Equality Multiplier," NBER Working Papers 15076, National Bureau of Economic Research, Inc.
    8. Timothy Hicks, 2023. "Torben Iversen and Philipp Rehm: Big data and the welfare state: how the information revolution threatens social solidarity," Public Choice, Springer, vol. 194(3), pages 421-426, March.
    9. Chang, Alex Chuan-hsien, 2018. "How do Asian values constrain public support for redistribution?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 77(C), pages 139-150.
    10. Baptiste Françon, 2013. "Who turned their back on the SPD? Electoral disaffection with the German Social Democratic Party and the Hartz reforms," Post-Print halshs-00973879, HAL.
    11. Pahontu, Raluca L., 2022. "Divisive jobs: three facets of risk, precarity, and redistribution," LSE Research Online Documents on Economics 111593, London School of Economics and Political Science, LSE Library.
    12. Dimick, Matthew & Stegmueller, Daniel, 2015. "The Political Economy of Risk and Ideology," CAGE Online Working Paper Series 237, Competitive Advantage in the Global Economy (CAGE).
    13. Charlotte Cavaill, 2015. "Deservingness, Self-Interest and the Welfare State: Why Some Care More about Deservingness than Others and Why It Matters," LIS Working papers 652, LIS Cross-National Data Center in Luxembourg.
    14. Baptiste Françon, 2013. "Who turned their back on the SPD? Electoral disaffection with the German Social Democratic Party and the Hartz reforms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00973879, HAL.
    15. Israel Marques II, 2022. "Skipping Out On The Check: Institutional Quality, Tax Evasion, And Individual Preferences For Social Policy," HSE Working papers WP BRP 85/PS/2022, National Research University Higher School of Economics.
    16. Olivier Jacques & David Weisstanner, 2022. "The Micro-Foundations of Permanent Austerity: Income Stagnation and the Decline of Taxability in Advanced Democracies," LIS Working papers 839, LIS Cross-National Data Center in Luxembourg.
    17. David Weisstanner, 2020. "Income Growth and Preferences for Redistribution: The Role of Absolute and Relative Economic Experiences," LIS Working papers 782, LIS Cross-National Data Center in Luxembourg.
    18. Bruno Amable, 2009. "The Differentiation of Social Demands in Europe. The Social Basis of the European Models of Capitalism," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 91(3), pages 391-426, May.
    19. Guizzo Altube, Matías & Scartascini, Carlos & Tommasi, Mariano, 2023. "The Political Economy of Redistribution and (in)Efficiency in Latin America and the Caribbean," IDB Publications (Working Papers) 13194, Inter-American Development Bank.
    20. Busemeyer, Marius R. & Cattaneo, Maria Alejandra & Wolter, Stefan C., 2010. "Individual policy preferences for vocational versus academic education micro level evidence for the case of Switzerland," MPIfG Discussion Paper 10/11, Max Planck Institute for the Study of Societies.
    21. Jerzak, Connor T. & Libgober, Brian, 2020. "The impact of a transportation intervention on electoral politics: Evidence from E-ZPass," Research in Transportation Economics, Elsevier, vol. 80(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cge:wacage:228. See general information about how to correct material in RePEc.

    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: Jane Snape (email available below). General contact details of provider: https://edirc.repec.org/data/dewaruk.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.