IDEAS home Printed from https://ideas.repec.org/p/diw/diwsop/diw_sp809.html
   My bibliography  Save this paper

The Political Economy of Risk and Ideology

Author

Listed:
  • Matthew Dimick
  • Daniel Stegmueller

Abstract

This paper argues for the central role of risk aversion in shaping political ideology. We develop a political economy model, which makes explicit the link between risk aversion, the labor market, government policy, and ideology. Our model distinguishes the effects of risk aversion from unemployment risk and our evidence sheds light on debates over explanations for the welfare state. We test our model using a large-scale household panel with an experimentally validated measure of risk aversion. We find that risk aversion is a systematic and important determinant of political-economic attitudes and is at least as important as, if not more so, an individual’s position in the income distribution.

Suggested Citation

  • Matthew Dimick & Daniel Stegmueller, 2015. "The Political Economy of Risk and Ideology," SOEPpapers on Multidisciplinary Panel Data Research 809, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp809
    as

    Download full text from publisher

    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.522483.de/diw_sp0809.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mondak, Jeffery J. & Hibbing, Matthew V. & Canache, Damarys & Seligson, Mitchell A. & Anderson, Mary R., 2010. "Personality and Civic Engagement: An Integrative Framework for the Study of Trait Effects on Political Behavior," American Political Science Review, Cambridge University Press, vol. 104(1), pages 85-110, February.
    2. Camerer, Colin F & Hogarth, Robin M, 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 7-42, December.
    3. 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.
    4. 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.
    5. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Discussion Papers of DIW Berlin 511, DIW Berlin, German Institute for Economic Research.
    6. Joachim R. Frick & Markus M. Grabka & Jan Marcus, 2007. "Editing and Multiple Imputation of Item-Non-Response in the 2002 Wealth Module of the German Socio-Economic Panel (SOEP)," Data Documentation 18, DIW Berlin, German Institute for Economic Research.
    7. Brad Verhulst & Lindon J. Eaves & Peter K. Hatemi, 2012. "Correlation not Causation: The Relationship between Personality Traits and Political Ideologies," American Journal of Political Science, John Wiley & Sons, vol. 56(1), pages 34-51, January.
    8. Alberto Alesina & Nicola Fuchs-Schundeln, 2005. "Good bye Lenin (or not?): The effect of Communism on people's preferences," Harvard Institute of Economic Research Working Papers 2076, Harvard - Institute of Economic Research.
    9. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    10. Quinn, Kevin M., 2004. "Bayesian Factor Analysis for Mixed Ordinal and Continuous Responses," Political Analysis, Cambridge University Press, vol. 12(4), pages 338-353.
    11. Mondak, Jeffery J & Halperin, Karen D, 2008. "A Framework for the Study of Personality and Political Behaviour," British Journal of Political Science, Cambridge University Press, vol. 38(2), pages 335-362, April.
    12. Gerber, Alan S. & Huber, Gregory A. & Doherty, David & Dowling, Conor M. & Ha, Shang E., 2010. "Personality and Political Attitudes: Relationships across Issue Domains and Political Contexts," American Political Science Review, Cambridge University Press, vol. 104(1), pages 111-133, February.
    13. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    14. 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.
    15. 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.
    16. Rebecca Morton & Jean-Robert Tyran & Erik Wengström, 2011. "Income and Ideology: How Personality Traits, Cognitive Abilities, and Education Shape Political Attitudes," Discussion Papers 11-08, University of Copenhagen. Department of Economics.
    17. Peter E. Rossi, 2014. "Bayesian Non- and Semi-parametric Methods and Applications," Economics Books, Princeton University Press, edition 1, number 10259.
    18. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    19. Michel Wedel & Wagner Kamakura, 2001. "Factor analysis with (mixed) observed and latent variables in the exponential family," Psychometrika, Springer;The Psychometric Society, vol. 66(4), pages 515-530, December.
    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. K Amber Curtis & Steven V Miller, 2021. "A (supra)nationalist personality? The Big Five’s effects on political-territorial identification," European Union Politics, , vol. 22(2), pages 202-226, June.
    2. 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).
    3. Sarah Jacobson & Ragan Petrie, 2009. "Learning from mistakes: What do inconsistent choices over risk tell us?," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 143-158, April.
    4. 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.
    5. Vischer, Thomas & Dohmen, Thomas & Falk, Armin & Huffman, David & Schupp, Jürgen & Sunde, Uwe & Wagner, Gert G., 2013. "Validating an Ultra-Short Survey Measure of Patience," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 120(2), pages 142-145.
    6. Katherine Campbell & Cullen F. Goenner & Matthew Notbohm & Adam Smedema, 2022. "Political ideology and CEO performance under crisis," Review of Quantitative Finance and Accounting, Springer, vol. 58(1), pages 329-359, January.
    7. Daniel J. Benjamin & James J. Choi & A. Joshua Strickland, 2010. "Social Identity and Preferences," American Economic Review, American Economic Association, vol. 100(4), pages 1913-1928, September.
    8. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2010. "Are Risk Aversion and Impatience Related to Cognitive Ability?," American Economic Review, American Economic Association, vol. 100(3), pages 1238-1260, June.
    9. 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.
    10. Adam Booij & Bernard Praag & Gijs Kuilen, 2010. "A parametric analysis of prospect theory’s functionals for the general population," Theory and Decision, Springer, vol. 68(1), pages 115-148, February.
    11. Alberto Montagnoli & Mirko Moro & Georgios A. Panos & Robert E. Wright, 2016. "Financial Literacy and Political Orientation in Great Britain," Working Papers 2016_23, Business School - Economics, University of Glasgow.
    12. 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.
    13. Hollibaugh, Gary E. & Klingler, Jonathan & Ramey, Adam, 2015. "Don't Know What You Got: A Bayesian Hierarchical Model of Neuroticism and Nonresponse," IAST Working Papers 15-27, Institute for Advanced Study in Toulouse (IAST).
    14. Frank Fossen & Daniela Glocker, 2011. "Expected future earnings, taxation, and university enrollment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(6), pages 688-723, December.
    15. Hao, Li & Houser, Daniel & Mao, Lei & Villeval, Marie Claire, 2016. "Migrations, risks, and uncertainty: A field experiment in China," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 126-140.
    16. François Desmoulins-Lebeault & Luc Meunier, 2018. "Moment Risks: Investment for Self and for a Firm," Decision Analysis, INFORMS, vol. 15(4), pages 242-266, December.
    17. Bernd Hardeweg & Lukas Menkhoff & Hermann Waibel, 2013. "Experimentally Validated Survey Evidence on Individual Risk Attitudes in Rural Thailand," Economic Development and Cultural Change, University of Chicago Press, vol. 61(4), pages 859-888.
    18. Julie Hassing Nielsen, 2016. "Personality and Euroscepticism: The Impact of Personality on Attitudes Towards the EU," Journal of Common Market Studies, Wiley Blackwell, vol. 54(5), pages 1175-1198, September.
    19. repec:eur:ejserj:521 is not listed on IDEAS
    20. Fiore, Annamaria, 2009. "Experimental Economics: Some Methodological Notes," MPRA Paper 12498, University Library of Munich, Germany.
    21. Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.

    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:diw:diwsop:diw_sp809. 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: Bibliothek (email available below). General contact details of provider: https://edirc.repec.org/data/sodiwde.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.