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Why Doesn't the US Have a European-Style Welfare System?

  • Alberto Alesina
  • Edward Glaeser
  • Bruce Sacerdote

European countries are much more generous to the poor relative to the US level of generosity. Economic models suggest that redistribution is a function of the variance and skewness of the pre-tax income distribution, the volatility of income (perhaps because of trade shocks), the social costs of taxation and the expected income mobility of the median voter. None of these factors appear to explain the differences between the US and Europe. Instead, the differences appear to be the result of racial heterogeneity in the US and American political institutions. Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters. American political institutions limited the growth of a socialist party, and more generally limited the political power of the poor.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8524.

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Date of creation: Oct 2001
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Publication status: published as Alesina, Alberto, Edward Glaeser and Bruce Sacerdote. “Why Doesn’t the United States Have a European-Style Welfare State?” Brookings Paper on Economics Activity (Fall 2001): 187-278.
Handle: RePEc:nbr:nberwo:8524
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