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1. Does ethnic heterogeneity decrease workers’ effort in the presence of income redistribution? An experimental analysis

Author:
Christoph Schütt, David Pipke, Lena Detlefsen, and Gianluca Grimalda
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Ethnic discrimination is ubiquitous, and it has been shown to exert adverse effects on income redistribution. The reason is that a country’s ethnic majority, if richer than the average, may be unwilling to transfer resources to the country’s ethnic minorities if poorer than the average. A yet untested mechanism is that a country’s ethnic majority may reduce their work effort knowing that their income will finance redistribution to ethnic minorities. We test for this mechanism experimentally in triadic interactions. A German citizen acting as a worker is randomly matched with a recipient who can be another German, an economic migrant, or an asylum seeker in Germany. Workers know that another German citizen may transfer part of their earnings to the recipient. The recipient does not exert any work effort. Even if the recipient’s identity does not affect effort in the aggregate, social identity strongly moderates this relationship. Participants with a strong German identity, i.e., who report feeling close to other Germans, exert significantly less effort than other participants if the recipient is an asylum seeker. They also exert more effort when matched with a German recipient than an asylum seeker, while participants with a less strong German identity do the opposite. Moreover, participants with a strong German identity exert slightly more effort when matched with economic migrants than with asylum seekers, while others tend to do the opposite, albeit statistically insignificantly. Workers’ beliefs over the third party’s redistribution rate do not mediate such results and are generally inaccurate.
Topic:
Economics, Discrimination, Tax Systems, Labor Market, Redistribution, and Welfare State
Political Geography:
Global Focus

2. Cross-Country Evidence on the Determinants of Preferences for Redistribution

Author:
Gianluca Grimalda and David Pipke
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Redistribution differs widely across countries, but our understanding of why this is the case is limited. In democracies, the extent of redistribution should ultimately reflect citizens’ preferences. We measure preferences for redistribution in six developed countries through internationally standardized questions in which respondents are faced with realistic budgetary constraints on their choice. We also measure a broad array of demographic, attitudinal, and ideological characteristics and examine their correlations with the preferred pattern of redistribution. As expected, individual income is associated with lower demand for redistribution, but this relationship loses significance once other factors are controlled for. Beliefs on social mobility have, in the aggregate, the largest effect in reducing demand for redistribution, the effect being largest in the US but insignificant in Italy and Slovenia. Trust in government has a negative effect on demand for redistribution across all countries. In line with other studies, we interpret this result as evidence that people believing that the political élite is corrupt demand more redistribution. Financial security, a proxy for the Prospect of Upward Mobility hypothesis, is also a significant correlate of preferences for redistribution, the effect being largest in Japan but small in the UK and Slovenia. Finally, discrimination of racial minorities is associated with lower demand for redistribution, but the effect is only significant in the US and Germany. Overall, the main theories that have been proposed to account for preferences for redistribution are confirmed to be valid, but with significant variation across countries.
Topic:
Minorities, Democracy, Economic Mobility, Social Order, and Redistribution
Political Geography:
Global Focus

3. Shared Capital Initiatives – for Redistribution and Recognition

Author:
Sanjay Reddy
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Center on International Cooperation (CIC)
Abstract:
Shared capital, defined as a broadly distributed pattern of rights over productive assets, can be a powerful instrument to address economic and social inequalities. We argue that initiatives to bring about shared capital can foster both redistribution and recognition, and thereby bring about more inclusive and peaceful societies. Based on experience, we suggest moreover that they are feasible and can be advanced by suitable policies and actions—at local, national, and global levels. Shared capital can involve distribution of various rights of an asset, including those of use, control, income, and transfer. This paper considers nine cases which feature some experience of shared capital involving various kinds of rights being distributed and relate these to different kinds of assets. In almost every case, the state has an important role to play in facilitating the distribution of rights.
Topic:
Regulation, Inequality, Peace, Sustainability, Capital, Redistribution, and Inclusion
Political Geography:
Global Focus

4. Artificial Intelligence, Globalization, and Strategies for Economic Development

Author:
Anton Korinek and Joseph E. Stiglitz
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Progress in artificial intelligence and related forms of automation technologies threatens to reverse the gains that developing countries and emerging markets have experienced from integrating into the world economy over the past half century, aggravating poverty and inequality. The new technologies have the tendency to be labor-saving, resource-saving, and to give rise to winner-takes-all dynamics that advantage developed countries. We analyze the economic forces behind these developments and describe economic policies that would mitigate the adverse effects on developing and emerging economies while leveraging the potential gains from technological advances. We also describe reforms to our global system of economic governance that would share the benefits of AI more widely with developing countries.
Topic:
Development, Globalization, Science and Technology, Inequality, Artificial Intelligence, and Redistribution
Political Geography:
Global Focus

5. Policy Experimentation, Redistribution and Voting Rules

Author:
Vincent Anesi and T. Renee Bowen
Publication Date:
08-2018
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
We study conditions under which optimal policy experimentation can be implemented by a committee. We consider a dynamic bargaining game in which committee members choose to implement either a risky reform or a safe alternative with known returns each period. We find that when no redistribution is allowed the unique equilibrium outcome is generically inefficient. When committee members are allowed to redistribute resources (even arbitrarily small amounts), there always exists an equilibrium that supports optimal experimentation for any voting rule with no veto players. With veto players, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights are more of an obstacle to optimal policy experimentation than constraints on redistribution.
Topic:
Politics, Reform, Voting, and Redistribution
Political Geography:
Global Focus

6. Labor Market Participation, Political Ideology and Distributive Preferences

Author:
Simona Demel, Abigail Barr, Luis Miller, and Paloma Ubeda
Publication Date:
12-2016
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
Using a political-frame-free, lab-in-the-field experiment, we investigate the effects of employment status and political ideology on preferences for redistribution. The experiment consists of a real-effort task, followed by a four-player dictator game. In one treatment, initial endowments depend on participants’ performance in the real-effort task, i.e., they are earned, in the other, they are randomly determined. We find that being employed or unemployed affects revealed redistributive preferences, while the political ideology of the employed and unemployed does not. In contrast, the revealed redistributive preferences of students are strongly related to their political ideologies. The employed and right-leaning students redistribute earnings less than windfalls, the unemployed and left-leaning students make no such distinction. We conclude that, when people are not exposed to the sometimes harsh realities of the labor market, their redistributive preferences depend on their political ideology but, when they are exposed, the effect of those realities overrules their ideology.
Topic:
Economics, Politics, Employment, Ideology, Labor Market, and Redistribution
Political Geography:
Global Focus