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What kind of Welfare State do you prefer? An experiment on framing the social insurance scheme

Author

Listed:
  • Francesco Farina
  • Stefania Ottone
  • Ferrucio Ponzano

Abstract

A real-effort experiment is conducted in order to detect preferences for one of three different models of Welfare State characterized by different schemes of tax-and-transfers. Experimental subjects have to choose (both under and without veil of ignorance concerning their position in the society created in the lab) among: a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; b) an actuarially-fair scheme where low-ability and low-earnings subjects bear individual full responsibility for risk exposure; c) a progressive scheme where mutual risk insurance spreads risk across all subjects, so that low-ability and low-earnings individuals are compensated. The aim is to investigate how subjects posit with respect to the task performed by the Welfare State, which is the interaction between inequality of opportunity and income inequality facing low-ability and low-earnings individuals due to their relatively higher risk exposure. Our most relevant finding is that preference is not much motivated by a justice principle, but mainly by the expectation on one’s own position in the society.

Suggested Citation

  • Francesco Farina & Stefania Ottone & Ferrucio Ponzano, 2015. "What kind of Welfare State do you prefer? An experiment on framing the social insurance scheme," Working Papers 295, University of Milano-Bicocca, Department of Economics, revised Mar 2015.
  • Handle: RePEc:mib:wpaper:295
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    References listed on IDEAS

    as
    1. Sinn, Hans-Werner, 1995. " A Theory of the Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 495-526, December.
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    3. Alberto Alesina & Guido Cozzi & Noemi Mantovan, 2012. "The Evolution of Ideology, Fairness and Redistribution," Economic Journal, Royal Economic Society, vol. 122(565), pages 1244-1261, December.
    4. Paolo Acciari & Sauro Mocetti, 2012. "The geography of income inequality in Italy," Politica economica, Società editrice il Mulino, issue 3, pages 307-343.
    5. Krawczyk, Michal, 2010. "A glimpse through the veil of ignorance: Equality of opportunity and support for redistribution," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 131-141, February.
    6. Fleurbaey, Marc, 2012. "Fairness, Responsibility, and Welfare," OUP Catalogue, Oxford University Press, number 9780199653591.
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    9. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
    10. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the United States Have a European-Style Welfare State?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 187-278.
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    More about this item

    Keywords

    Welfare State; insurance; redistribution; proportional system; actuarially-fair system; progressive system;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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