Income inequality and social preferences for redistribution and compensation differentials

Arbeitspapier

In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe). If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change. Exploring movements around these long-term levels, however, this study finds mixed evidence regarding the vicious cycle hypothesis. On one hand, larger compensation differentials are accepted as inequality grows. This growth in differentials is of a smaller magnitude than the actual increase in inequality, but it is nonetheless positive and substantial in size. Weighing against this, growth in inequality is met with greater support for government-led redistribution to the poor. These patterns suggest that short-run inequality shocks can be reinforced in the labor market but do not result in weaker political preferences for redistribution.

Object Details

• ISBN: 978-952-6699-52-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 31/2013

Classification and Topics

• Classification: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Factor Income Distribution ; Allocative Efficiency; Cost-Benefit Analysis ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement ; Altruism; Philanthropy; Intergenerational Transfers ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; National Government Expenditures and Welfare Programs ; Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs ; Wage Level and Structure; Wage Differentials ; Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
• Subject: Inequality ; Social Preferences ; Social Norms ; Redistribution ; Welfare ; Class Warfare

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kerr, William R.
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/212271
• Last update: 10.03.2025, 11:42 AM CET