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

Listed author(s):
  • Francesco Farina
  • Stefania Ottone
  • Ferrucio Ponzano
Registered author(s):

    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.

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    File URL: http://dems.unimib.it/repec/pdf/mibwpaper295.pdf
    File Function: First version, 2015
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    Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 295.

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    Length: 35
    Date of creation: Mar 2015
    Date of revision: Mar 2015
    Handle: RePEc:mib:wpaper:295
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    1. Sinn, Hans-Werner, 1995. " A Theory of the Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 495-526, December.
    2. Konow, James, 2001. "Fair and square: the four sides of distributive justice," Journal of Economic Behavior & Organization, Elsevier, vol. 46(2), pages 137-164, October.
    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. Acciari Paolo & Mocetti Sauro, 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.
    7. 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.
    8. Lester C. Thurow, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, Oxford University Press, vol. 85(2), pages 327-336.
    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.
    11. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    12. Sen, Amartya, 1993. "Markets and Freedoms: Achievements and Limitations of the Market Mechanism in Promoting Individual Freedoms," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 519-541, October.
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