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Uncertainty and the Demand for Redistribution

Author

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  • György Molnár

    () (Institute of Economics, Hungarian Academy of Sciences)

  • Zsuzsa Kapitány

    () (Institute of Economics, Hungarian Academy of Sciences)

Abstract

In this paper we focus on the connection between perception of the competitive pressure situation (unemployment, uncertainty, rising income and wealth inequalities, decreasing mobility) and demand for redistribution. Our context is Hungary, between 2000 and 2002. We identify some basic variables that have important effect on the individuals' preferences for redistribution, namely, uncertainty in actual and future income, and unemployment. Uncertainty raises the demand for redistribution even among the upwardly mobile people, and labour market status is also a major element of dissatisfaction and demand for redistribution. The most frustrated and indecisive people are those who have no clear knowledge about the immediate and the distant future. Indecisive people favour redistribution more than those with negative expectations. Past personal experience and the expectation for future income have a very strong effect on the formation of thinking about income redistribution. Even those who are currently mobile in income tend to support redistribution if they are expecting a decline in their future income and welfare. According to the POUM hypothesis, we also found a negative correlation between expected intergenerational mobility and individual support for redistribution. People perceive their relative income position, their relative mobility and inequality in different ways and their demand for redistribution substantially depends on the subjective and not on the objective income position. Concerning perception of changes in inequality, we found that the more people feel that inequalities are increasing, the more they favour redistribution policies.

Suggested Citation

  • György Molnár & Zsuzsa Kapitány, 2006. "Uncertainty and the Demand for Redistribution," IEHAS Discussion Papers 0608, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 30 Aug 2006.
  • Handle: RePEc:has:discpr:0608
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    File URL: http://econ.core.hu/doc/dp/dp/mtdp0608.pdf
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    References listed on IDEAS

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    1. Blanchflower, David G. & Oswald, Andrew J., 2004. "Well-being over time in Britain and the USA," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1359-1386, July.
    2. 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.
    3. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 699-746.
    4. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    5. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
    6. R. Bénabou & E. Ok, 2000. "Mobility as Progressivity: Ranking Income Processes According to Equality of Opportunity," Princeton Economic Theory Papers 00f1, Economics Department, Princeton University.
    7. 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.
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    Cited by:

    1. Hajdu, Tamás & Hajdu, Gábor, 2014. "Reduction of income inequality and subjective well-being in Europe," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-29.

    More about this item

    Keywords

    Mobility; Subjective Mobility; POUM; Subjective Well-being; Redistribution;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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