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Inequality, Social Insurance, and Redistribution

Published online by Cambridge University Press:  30 May 2017

Karl Ove Moene  and
Michael Wallerstein
Karl Ove Moene
Affiliation:
University of Oslo
Michael Wallerstein
Affiliation:
Northwestern University
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Abstract

Is the political support for welfare policy higher or lower in less egalitarian societies? We answer the question using a model of welfare policy as publicly financed insurance that pays benefits in a redistributive manner. When voters have both redistributive and insurance motives for supporting welfare spending, the effect of inequality depends on how benefits are targeted. Greater inequality increases support for welfare expenditures when benefits are targeted to the employed but decreases support when benefits are targeted to those without earnings. With endogenous targeting, support for benefits to those without earnings declines as inequality increases, whereas support for aggregate spending is a V-shaped function of inequality. Statistical analysis of welfare expenditures in advanced industrial societies provides support for key empirical implications of the model.

Type
Research Article
Information
American Political Science Review , Volume 95 , Issue 4 , December 2001 , pp. 859 - 874
Copyright
Copyright © American Political Science Association 2001

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