Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution

Neustadt, Ilja and Zweifel, Peter (2010): Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution.

Abstract

The sustainability of the welfare state ultimately depends on citizens' preferences for income redistribution. They are elicited through a Discrete Choice Experiment performed in 2008 in Switzerland. Attributes are redistribution as GDP share, its uses (the unemployed, old-age pensioners, people with ill health etc.), and nationality of beneficiary. Estimated marginal willingness to pay (WTP) is positive among those who deem benefits too low, and negative otherwise. However, even those who state that government should reduce income inequality exhibit a negative WTP on average. The major finding is that estimated average WTP is maximum at 21% of GDP, clearly below the current value of 25%. Thus, the present Swiss welfare state does not appear sustainable.

• Item Type: MPRA Paper
• Language: English
• Keywords: Income redistribution; welfare state; sustainability; preferences; willingness to pay; discrete choice experiments
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H29 - Other; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C35 - Discrete Regression and Qualitative Choice Models ; Discrete Regressors ; Proportions; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments

References

Neustadt, Ilja and Peter Zweifel (2009), "Economic Well-Being, Social Mobility, and Preferences for Income Redistribution: Evidence from a Discrete Choice Experiment", SOI Working Paper 0909, University of Zurich, Socioeconomic Institute