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Why does the amount of income redistribution differ between the United States and Europe?

Author

Listed:
  • Sule Akkoyunlu
  • Ilja Neustadt
  • Peter Zweifel

Abstract

In this paper, the amount of income redistribution in the United States, the European Union, and Switzerland is compared and empirically related to economic, political, and behavioral determinants elaborated in the literature. Lying in between the two poles, Switzerland provides unique evidence about the relative merits of competing hypotheses. It tips the balance against the economic explanation, which predicts more rather than less income redistribution in the United States compared to the EU. It only weakly supports the political model linking proportional representation and multiparty structure (which also characterize Switzerland) to redistribution; yet the Swiss share of transfers in the GDP is low. Behavioral explanations receive a good deal of support from the case of Switzerland, a country that shares with the United States the belief that hard work rather than luck, birth, connections, and corruption determine wealth. In this way, the Janus face of Switzerland may help to explain the difference in the amount of U.S. and EU income redistribution.

Suggested Citation

  • Sule Akkoyunlu & Ilja Neustadt & Peter Zweifel, 2009. "Why does the amount of income redistribution differ between the United States and Europe?," KOF Working papers 09-228, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:09-228
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    File URL: http://dx.doi.org/10.3929/ethz-a-005799473
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    Cited by:

    1. Peter Zweifel & Ilja Neustadt, 2013. "Why Does Income Redistribution Differ Between Countries? Comparative Evidence From Germany and Switzerland," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(3), pages 39-47, October.
    2. Emma M. Iglesias & J. Atilano Pena López & José Manuel Sánchez Sántos, 2013. "Evolution over time of the determinants of preferences for redistribution and the support for the welfare state," Applied Economics, Taylor & Francis Journals, vol. 45(30), pages 4260-4274, October.
    3. Neustadt, Ilja & Zweifel, Peter, 2011. "Income redistribution: how to divide the pie?," MPRA Paper 35427, University Library of Munich, Germany.

    More about this item

    Keywords

    Redistribution; Income Mobility; Openness; Political Economy; Beliefs; Religion; Immigration;

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