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The Structure of Inequality and the Politics of Redistribution

Noam Lupu1
01 May 2011-American Political Science Review (Cambridge University Press)-Vol. 105, Iss: 02, pp 316-336
TL;DR: The authors argue that inequality matters for redistributive politics in advanced capitalist societies, but it is the structure of inequality, not the level of inequality that matters, and they test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and none-lderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the distribution in the lower half.
Abstract: Against the current consensus among comparative political economists, we argue that inequality matters for redistributive politics in advanced capitalist societies, but it is the structure of inequality, not the level of inequality, that matters. Our theory posits that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich. We test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution increases relative to the dispersion of earnings in the lower half of the distribution. In addition, we present survey evidence on preferences for redistribution among middle-income voters that is consistent with our theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew.

Summary (3 min read)

Introduction

  • Reference Against the current consensus among comparative political economists, the authors argue that inequality matters for redistributive politics in advanced capitalist societies, but it is the structure of inequality, not the level of inequality, that matters.
  • The authors theory posits that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich.
  • In addition, the authors present survey evidence on preferences for redistribution among middle-income voters that is consistent with their theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew.
  • Layout of this document may differ from the published version, also known as Disclaimer.

JONAS PONTUSSON Université de Genève

  • Against the current consensus among comparative political economists, the authors argue that inequalitymatters for redistributive politics in advanced capitalist societies, but it is the structure of in-equality, not the level of inequality, that matters.
  • The authors theory posits that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between the middle and the poor is small relative to the distance between the middle and the rich.
  • In addition, the authors present survey evidence on preferences for redistribution among middle-income voters that is consistent with their theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew.
  • Jonas Pontusson is Professor of Comparative Politics, Département de science politique, Université de Genève, 40, Boulevard du Pont d’Arve, 1211 Genève 4, Switzerland (Jonas.Pontusson@ unige.ch).
  • The authors also thank Rafaela Dancygier and Lane Kenworthy for sharing their data.

SOCIAL AFFINITY AND POLITICAL COALITIONS

  • The model of redistributive politics proposed by Romer (1975) and developed by Meltzer and Richard (1981) does not provide an adequate explanation of variation in the extent of government redistribution across OECD countries.
  • As commonly noted (e.g., McCarty and Pontusson 2009, 669–72), the limitations of the RMR model may be attributed to its assumptions about either the demand for or supply of redistribution (or both).
  • Luttmer’s (2001) influential analysis of individual-level support for welfare spending in the U.S. provides strong evidence of what he refers to as racial group loyalty.
  • More recently, Shayo’s (2009) important contribution suggests that the concept of social affinity might be usefully extended to social classes defined by income.
  • These authors posit that middleincome voters oppose redistribution because they fear it will enable the poor to gain access to middle-class neighborhoods and social networks, thereby undermining their own relative position in the status hierarchy.

EMPIRICAL SETUP

  • The authors main empirical analysis consists of a series of models of redistribution (measured as the percentage change in Gini coefficients brought about by taxes and government transfers) and social spending (measured in percent of gross domestic product [GDP]).
  • OECD data, relative to other sources of data on market inequality, is that it provides separate measures of the upper and lower halves of the earnings distribution, while also providing reasonably long time series of annual observations for the countries included in their analysis.
  • From a theoretical point of view, it is important for us to control for the distribution of ethnic minorities across the income distribution, but here the authors run into serious problems of data and measurement.
  • Working with a significantly larger data set, the authors include three additional control variables in their models of social spending.

Model Specifications

  • For each country i and year t, their statistical models of redistribution treat the level of redistribution (Ri,t) as a function of previous levels (Ri,t − 1) and a set of policies and structural factors (Pi,t) that cause redistribution to deviate from the status quo.
  • Because data on redistribution are unequally spaced, whereas values for the independent variables are annual, the authors follow Persson, Roland, and Tabellini (2007) in using a time- 17 Because they are simply interested in controlling for this denominator effect, they do not lag GDP growth.
  • One methodological concern is the potential for nonstationarity, which could induce spurious correlations.
  • When the authors correct for this by smoothing the variables in question using a moving average process with one lag, and then replicate their analysis using the smoothed data, they obtain results substantively equivalent to those they report.
  • As with redistribution, this renders the estimation of fully specified fixed-effects models 22 We again estimate panel-corrected standard errors and correct for groupwise heteroscedasticity and contemporaneous correlation.the authors.the authors.

MAIN EMPIRICAL RESULTS

  • Table 2 presents their first set of results, with redistribution as the dependent variable.
  • It does not appear to proxy for the 90–10 ratio in their analysis.
  • Regarding the 90–10 ratio, their results are consistent with previous studies, calling into question the RMR model’s prediction of a positive association between the level of inequality and redistribution.
  • Two results in Table 3 appear counterintuitive: Unemployment and proportionality of electoral rules both turn out to be consistently associated with less nonelderly social spending.
  • The results presented in Table 4 suggest that this is not the case.

CAUSAL MECHANISMS

  • The results presented in Tables 2 to 4 are consistent with their theory of how the structure of inequality influences the politics of redistribution, but they do not demonstrate that the preferences of middle-income voters are the crucial intervening variable in the relationship between inequality and redistribution.
  • These results also do not address the question of how the preferences of middle-income voters translate into policy outcomes.

Middle-income Preferences

  • In keeping with their theoretical framework, the data presented in Figures 2 and 3 are restricted to survey respondents in the middle third of the distribution of household income (based on self-reported income).
  • 26 In using this measure, the authors follow Goodrich and Rehm (2008), who convincingly show that creating a summary measure of support for redistribution by assigning numerical scores to categorical responses and averaging these scores on a national basis is problematic.
  • Thus conceived, American exceptionalism poses less of a challenge to their theoretical framework than Swiss or Spanish exceptionalism because it is clearly attributable to the high concentration of racial-ethnic minorities in the bottom of the income distribution (cf. Alesina and Glaeser 2004; Gilens 2000).
  • Evidence that the preferences of middle-income voters represent an important link in the causal chain from the structure of inequality to redistributive policy outcomes.

CONCLUSION

  • Comparative studies of the political economy of redistribution have largely overlooked the effects of the structure of inequality.
  • Quite reasonably, these authors interpret their results to mean that eligibility for means-tested social spending increases with the 50–10 ratio and that the political influence of the affluent increases with the 90–50 ratio.
  • The authors preliminary analysis of survey data suggests that the structure of inequality shapes the preferences of middle-income voters and that these preferences in turn impact government policy.
  • Quite legitimately, macrocomparative analyses of the type presented here invite questions about endogeneity.
  • Technology constitutes another potential source of variation in the structure of earnings inequality.

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Reference
The Structure of Inequality and the Politics of Redistribution
LUPU, Noam, PONTUSSON, Harry Jonas
Abstract
Against the current consensus among comparative political economists, we argue that
inequality matters for redistributive politics in advanced capitalist societies, but it is the
structure of inequality, not the level of inequality, that matters. Our theory posits that
middle-income voters will be inclined to ally with low-income voters and support redistributive
policies when the distance between the middle and the poor is small relative to the distance
between the middle and the rich. We test this proposition with data from 15 to 18 advanced
democracies and find that both redistribution and nonelderly social spending increase as the
dispersion of earnings in the upper half of the distribution increases relative to the dispersion
of earnings in the lower half of the distribution. In addition, we present survey evidence on
preferences for redistribution among middle-income voters that is consistent with our theory
and regression results indicating that the left parties are more likely to participate in
government when the structure of inequality is characterized by skew.
LUPU, Noam, PONTUSSON, Harry Jonas. The Structure of Inequality and the Politics of
Redistribution. The American political science review, 2011, vol. 105, no. 02, p. 316-336
DOI : 10.1017/S0003055411000128
Available at:
http://archive-ouverte.unige.ch/unige:40999
Disclaimer: layout of this document may differ from the published version.
1 / 1

psr1100012 xxx (xxx) April 25, 2011 14:49
American Political Science Review Vol. 105, No. 2 May 2011
doi:10.1017/S0003055411000128
The Structure of Inequality and the Politics of Redistribution
NOAM LUPU Princeton University
JONAS PONTUSSON Universit
´
edeGen
`
eve
A
gainst the current consensus among comparative political economists, we argue that inequality
matters for redistributive politics in advanced capitalist societies, but it is the structure of in-
equality, not the level of inequality, that matters. Our theory posits that middle-income voters
will be inclined to ally with low-income voters and support redistributive policies when the distance
between the middle and the poor is small relative to the distance between the middle and the rich. We
test this proposition with data from 15 to 18 advanced democracies and find that both redistribution and
nonelderly social spending increase as the dispersion of earnings in the upper half of the distribution
increases relative to the dispersion of earnings in the lower half of the distribution. In addition, we present
survey evidence on preferences for redistribution among middle-income voters that is consistent with our
theory and regression results indicating that the left parties are more likely to participate in government
when the structure of inequality is characterized by skew.
T
he recent growth of empirical scholarship on the
politics of redistribution in advanced capitalist
societies is impressive. Taking the canonical me-
dian voter model associated with Romer (1975) and
Meltzer and Richard (1981) as the point of departure,
much of this research asks, “Does more inequality
lead to more redistribution?” Although Kenworthy
and Pontusson (2005) and Milanovic (2000) show that
patterns of within-country variation broadly conform
to the core prediction of the Romer-Meltzer-Richard
(RMR) model, others point out that the cross-national
association between income inequality and redistribu-
tion among Organisation of Economic Co-operation
and Development (OECD) countries is in fact the op-
posite of what the canonical model seems to predict:
Governments in less egalitarian countries tend to en-
gage in less redistribution (e.g., Alesina and Glaeser
2004, 57–60). Perhaps because of the difficulty of recon-
ciling within- and cross-country evidence, the current
consensus seems to be that inequality does not matter
for the politics of redistribution, at least not in any
direct and particularly significant way. Instead, recent
studies emphasize the causal role of a range of other
Noam Lupu is a Ph.D. candidate, Department of Politics, Prince-
ton University, 130 Corwin Hall, Princeton, NJ 08544 (nlupu@
princeton.edu).
Jonas Pontusson is Professor of Comparative Politics,
D
´
epartement de science politique, Universit
´
edeGen
`
eve, 40, Boule-
vard du Pont d’Arve, 1211 Gen
`
eve 4, Switzerland (Jonas.Pontusson@
unige.ch).
Previous versions of this article were presented in seminars and
workshops at Harvard, Oxford, Princeton, Stanford, and the Univer-
sities of Toronto and Geneva, as well as the 2010 Annual Meetings
of the American Political Science Association and Midwest Polit-
ical Science Association. We are grateful to the many individuals
who asked difficult questions and made useful suggestions in these
venues. For detailed comments, we are indebted to Pablo Beramendi,
Michael Donnelly, Patrick Emmenegger, John Ferejohn, John
Huber, Kosuke Imai, Torben Iversen, Nolan McCarty, Gwyneth
McClendon, Daniel Oesch, Damian Raess, David Rueda, David
Soskice, and K
˚
are Vernby, in addition to the anonymous review-
ers and APSR editors. We also thank Rafaela Dancygier and Lane
Kenworthy for sharing their data. Replication data and do-file are
available on Lupu’s Web site. All unreported empirical analyses are
available from the authors on request.
factors: electoral rules (Persson, Roland, and Tabellini
2007; Persson and Tabellini 2003), government parti-
sanship (Bradley et al. 2003; Iversen and Soskice 2006),
national skill profiles (Iversen 2005; Iversen and Sos-
kice 2001), racial and ethnic diversity (Alesina and
Glaeser 2004), and religiosity (Scheve and Stasavage
2006).
We build on recent studies that treat racial and ethnic
diversity as an obstacle to redistributive politics. The
core idea of this literature is that social affinity is a
critical determinant of preferences for redistribution;
when racial or ethnic minorities comprise a significant
proportion of the poor, members of the majority group
are less likely to support redistributive policies. We
argue that social affinity should be conceived more
broadly and that the common circumstances and so-
cial networks associated with income are important
constitutive elements of social affinity, in addition to
racial or ethnic group membership. Inspired by Kristov,
Lindert, and McClelland (1992), this perspective sug-
gests that what matters to the politics of redistribution
is not the level of inequality, but rather the structure
of inequality.
1
Assuming that the support of middle-
income voters is critical to the implementation of re-
distributive policies, our theoretical framework boils
down to the following proposition: In the absence of
cross-cutting ethnic cleavages, middle-income voters
will empathize with the poor and support redistributive
policies when the income distance between the middle
and the poor is small relative to the income distance
between the middle and the affluenta condition
we refer to as skew.
2
1
Incorporating the role of pressure groups, Kristov, Lindert, and
McClelland’s (1992) theory of redistributive politics is quite different
from ours. Our indebtedness to these authors concerns the basic
idea that the structure of income inequality matters to redistributive
politics.
2
In a similar vein, Wilensky (1975, 57) asserts that “the more social
distance between the middle mass and the poor, the greater the
resistance to spending that appears to favor the poor.” Unlike Wilen-
sky, we emphasize income as the basis for social distance and also
consider the distance between the middle and the affluent. On both
counts, our core argument resonates with Acemoglu and Robinson’s
(2006) discussion of the role of the middle class in democratization.
1

psr1100012 xxx (xxx) April 25, 2011 14:49
Inequality and Redistribution May 2011
Our empirical analysis provides an initial test of the
social affinity hypothesis by estimating several models
of redistribution and social spending with data from 15
to 18 OECD countries over the period 1969 to 2004.
Controlling for factors that previous studies identify
as determinants of redistribution, and using measures
of inequality based on gross earnings, we show that
redistribution increases with dispersion of the upper
half of the earnings distribution and with compression
of the lower half of the earnings distribution. We go on
to probe the causal mechanisms behind these results
in two steps. We first present descriptive survey evi-
dence in support of our claims that (1) redistributive
policy outcomes correspond to the policy preferences
of middle-income voters, and (2) the structure of in-
equality helps explain why the preferences of middle-
income voters vary across countries and over time. The
second step explores the role of government partisan-
ship as an intervening variable, connecting demand for
redistribution to redistributive policy outcomes. Our
evidence on this score is far from definitive, but it
suggests that left-leaning governments are more likely
to redistribute income than right-leaning governments
and that governments are more likely to be left-leaning
when the structure of inequality is skewed.
We agree with Brooks and Manza (2007) that pub-
lic opinion matters more than the comparative wel-
fare state literature has generally recognized (cf. also
Kenworthy and McCall 2008). However, our approach
differs from theirs in two important respects. First, we
focus on the preferences of a particular and, arguably,
pivotal segment of the publicmiddle-income voters.
Second, we aspire not only to show that the preferences
of middle-income voters matter to policy outcomes, but
also to explain why the preferences of middle-income
voters vary across countries and over time. Our account
of why these preferences vary stands in sharp contrast
to the social rivalry hypothesis articulated by Corneo
and Gr
¨
uner (2002) and implicitly embraced by Shayo
(2009).
SOCIAL AFFINITY AND POLITICAL
COALITIONS
The model of redistributive politics proposed by
Romer (1975) and developed by Meltzer and Richard
(1981) does not provide an adequate explanation of
variation in the extent of government redistribution
across OECD countries. As commonly noted (e.g., Mc-
Carty and Pontusson 2009, 669–72), the limitations of
the RMR model may be attributed to its assumptions
about either the demand for or supply of redistribution
(or both). We focus on the demand for redistribution
and propose an alternative way to think about the
preferences of the median voter or, less stringently,
the preferences of middle-income voters. In so doing,
we assume that the preferences of middle-income vot-
ers are critical to the politics of redistribution and set
aside, for the time being, the question of how these
preferences are translated into policy. Our empirical
analysis explores the role of partisanship as an inter-
vening variable. However, our core argument, about
middle-income preferences, does not depend on stak-
ing a strong position in debates about whether parties
cater to core constituencies or the median voter.
Like a number of recent political-economy models,
most notably Iversen and Soskice (2006), our theo-
retical framework posits a society consisting of three
classes or social groups defined by income: the poor, the
middle, and the affluent. As long as no one class consti-
tutes a majority of the electorate, redistributive policy
will be set by a coalition of two groups, and such coali-
tions will almost certainly include the middle-income
group. These propositions are, of course, stylized sim-
plifications, but they capture core features of advanced
industrial societies and serve the useful purpose of fo-
cusing our attention on the question of whether middle-
income voters will ally with the poor or the affluent.
In the theoretical model proposed by Iversen and
Soskice (2006), the answer to this question depends
on the ability of parties to make credible commit-
ments under different electoral rules. Under majori-
tarian rules, middle-income voters will be inclined to
support center-right parties because they fear that
center-left parties will revert to the preferences of
the left’s poor constituency once in government. The
interests of middle-income voters are more closely
aligned with the first-order preferences of the afflu-
ent (no redistribution) than with those of the poor
(redistribution from the nonpoor to the poor). How-
ever, proportional representation provides for parties
that represent the middle-income group alone, making
possible the formation of center-left coalition govern-
ments committed to redistributing income from the
affluent to the benefit of the middle and the poor
alike. A crucial feature of the Iversen-Soskice model
is that the middle-income group never imposes (re-
distributive) taxes on itself. In contrast, the model
of redistribution that underlies our approach allows
for this possibility or, alternatively, for the possibil-
ity that the middle-income group will claim a less-
than-equal share of the redistributive benefits that the
poor and the middle jointly derive from taxing the
affluent.
The RMR model’s conception of short-term income
maximization as the foundation for preferences over
redistributive policy is surely too narrow. We can distin-
guish two broad alternatives to the RMR approach to
preferences. One alternative shares the RMR model’s
emphasis on material self-interest, but posits that in-
dividuals calculate the costs and benefits of redistri-
bution with a more extended time horizon, or in a
more “enlightened” manner. Insurance against future
income losses (Iversen and Soskice 2001; Moene and
Wallerstein 2001, 2003) or the recognition of negative
externalities associated with inequality (Alesina and
Giuliano 2009) might motivate affluent individuals to
support redistributive policies that do not benefit them
immediately. The other alternative holds that other-
regarding motivations of an altruistic nature also mat-
ter; in other words, individuals are (sometimes) willing
to forego some income for the benefit of others. Our
core argument builds on this latter approach, which
emphasizes that individuals should be viewed not as
2

psr1100012 xxx (xxx) April 25, 2011 14:49
American Political Science Review Vol. 105, No. 2
atomized maximizers of self-interest, however enlight-
ened, but as members of social groups or networks.
The notion of social affinity features prominently in
recent studies of how racial and ethnic fractionalization
affects demand for redistribution. Luttmer’s (2001) in-
fluential analysis of individual-level support for wel-
fare spending in the U.S. provides strong evidence of
what he refers to as racial group loyalty. According
to Luttmer’s analysis, individuals living in neighbor-
hoods with many welfare recipients are, on average,
less supportive of welfare spending. However, prox-
imity to white welfare recipients increases support for
welfare spending among white respondents, whereas
proximity to black welfare recipients increases support
for welfare spending among black respondents. Cru-
cially, Luttmer shows that racial group loyalty is just as
strong among high-income respondents as it is among
low-income respondents (see also Gilens 2000).
Building on Luttmer’s work, Alesina and Glaeser
(2004) demonstrate that social spending correlates with
various measures of ethnic, linguistic, and religious
fractionalization on a cross-national basis. Although
their measures of fractionalization fail to capture this,
Alesina and Glaeser’s theoretical discussion clearly
recognizes that the crucial issue is not fractionaliza-
tion per se, but rather how racial or ethnic cleavages
map onto the income distribution (cf. Selway 2011).
“Significant numbers of minorities among the poor,”
they argue, means that “the majority population can
be roused against transferring money to people who
are different from themselves” (Alesina and Glaeser
2004, 134).
More recently, Shayo’s (2009) important contribu-
tion suggests that the concept of social affinity might
be usefully extended to social classes defined by in-
come. Positing that social identities are defined by self-
categorization into groups and that there are multiple
groups with which any given individual might iden-
tify (see Turner et al. 1987), Shayo (2009) argues that
individuals choose to identify with one or another
groupsay, their class or their nationbased on (1)
perceived social distance to the prototypical member
of each group, and (2) the relative status of the group
in question. In our theoretical framework, individu-
als are enmeshed in social networks that are typically
class based, regardless of whether they identify with
their class. Members of the middle-income group must
decide whether they prefer an alliance with the poor
or with the affluent. Like Shayo, we posit that social
distance constitutes an important consideration in the
choice of alternative coalitions and suppose that in-
come differentials are a reasonably good proxy for so-
cial distance, at least in the absence of cross-cutting eth-
nic or racial cleavages.
3
It follows from these premises
that we should expect middle-income voters to be more
inclined to empathize with the poorand to support
3
Although Shayo (2009) formulates his theory in terms of individ-
uals’ perceptions of the social distance between themselves and the
prototype of a given group, he clearly believes, as we do, that such
perceptions correspond to objective group attributes to a significant
degree.
parties that advocate pro-poor redistributive policies
when the income distance to the poor is small relative
to the income distance to the affluent.
In our conceptualization, social affinity involves al-
truistic behavior, but it is quite different from general-
ized altruism. If middle-income voters were motivated
by generalized altruism, then their sympathy for the
poor would increase with the distance between their in-
come and that of the poor. In contrast, proximity is the
source of affinity in our theoretical framework. Social
affinity involves what Fowler and Kam (2007) refer to
as parochial altruism: altruism bounded by perceptions
of common group membership or shared experience
(see also Goette, Huffman, and Meier 2006). Middle-
income voters empathize with the poor (or affluent)
when they perceive the poor (or affluent) as living lives
similar to their own. In particular, we expect middle-
income voters to empathize with the poor (or affluent)
to the extent that they live in the same neighborhoods,
send their children to the same schools, and circulate
within the same social networks (McPherson, Smith-
Lovin, and Cook 2001). Having relatives who are poor
is also likely to be a source of social affinity with the
poor.
Arguably, mobility between income groups is an
important component of (or condition for) affinity
between income groups. A number of recent cross-
national studies indicate that relative income mobility
tends to decline with aggregate inequality (Aaberge
et al. 2002; Andrews and Leigh 2009; Blanden 2009).
The obvious reason is that income gains or losses of
a given size translate into larger movements across
the income distribution, up or down, when the income
distribution is more compressed. The probability of
moving between any two positions in the income distri-
bution (say, between the 20th and the 50th percentile)
is in part a function of the distance between the two
positions. When the distance between the poor and the
middle-income group is small, members of the middle-
income group face a greater probability of becoming
poor (or having children with low incomes), and this
will, we hypothesize, reinforce their affinity with the
poor. Conversely, prospects of upward mobility will re-
inforce middle-income affinity with the affluent when
the distance between the middle and the affluent is
small.
In future work, analyzing individual preferences for
redistribution, we hope to disentangle the effects of
social affinity and self-interest informed by mobility
prospects. However, we do not view social affinity
and self-interest as competing explanations of individ-
ual preferences for redistribution. Rather, we want to
emphasize the potential complementarities of other-
regarding and self-interested motivations. Social soli-
darity may become an operative behavioral norm when
individuals have some rational reason to suppose it
might serve their own interests over the long run (cf.
Converse 1964).
Our argument focuses on middle-income voters, but
the underlying logic ought to apply to the poor and
the affluent as well. When the distance to the mid-
dle is small, the poor should feel more affinity with
3

psr1100012 xxx (xxx) April 25, 2011 14:49
Inequality and Redistribution May 2011
the middle-income group and demand less redistribu-
tion. Similarly, the affluent should feel affinity with the
middle-income group, and perhaps be less resistant to
redistribution, when the distance between the middle
and the affluent is small.
Our social affinity hypothesis stands in sharp contrast
to the social rivalry hypothesis articulated by Corneo
and Gr
¨
uner (2002). These authors posit that middle-
income voters oppose redistribution because they fear
it will enable the poor to gain access to middle-class
neighborhoods and social networks, thereby under-
mining their own relative position in the status hi-
erarchy. By this logic, proximity to the poor should
underminerather than promotesupport for redis-
tribution among middle-income voters.
4
The status
dimension of Shayo’s (2009) theoretical model also
points in the direction of social rivalry as an impor-
tant factor behind individual preferences for redistri-
bution. There is no middle class in the model that Shayo
presents, but he briefly discusses such an extension
(fn. 17). With respect to the poor, Shayo argues that
redistribution improves their status, increasing their
propensity to identify with their social class rather than
their nation. Adding a middle class to his model, the im-
plication would seem to be that greater proximity to the
poor should reduce the value of being middle class, ren-
dering middle-class individuals more likely to identify
with the nation and less likely to support redistribution.
In this article, we test the social affinity hypothesis
against macro data and relate our core argument to
previous macrocomparative studies of the relationship
between inequality and redistribution. From a macro-
comparative perspective, our key claim is that the com-
bination of relatively small income differences in the
lower half of the distribution and relatively large in-
come differences in the upper half provides the most
favorable conditions for redistributive politics. Con-
versely, the combination of relatively large income
differences in the lower half of the distribution and
relatively small differences in the upper half under-
mines support for redistribution among pivotal middle-
income voters.
Like Kristov, Lindert, and McClelland (1992), we
estimate models of redistribution with separate mea-
sures of income differentials in the two halves of the
income distribution. We hypothesize that the 90–50
earnings ratio (i.e., the ratio of earnings in the 90th
percentile to earnings in the 50th percentile) will be
associated with more redistribution and that the 50–10
earnings ratio (i.e., the ratio of earnings in the 50th
4
Curiously, the empirical evidence Corneo and Gr
¨
uner (2002)
present in support of their social rivalry hypothesis appears instead
to support our social affinity hypothesis. Using survey data from
12 countries, Corneo and Gr
¨
uner divide respondents into income
quintiles and then estimate the effects of occupational prestige dif-
ferentials on attitudes toward redistribution. Their results show that
support for redistribution in any given quintile decreases with oc-
cupational prestige differentials relative to lower quintiles, and in-
creases with prestige differentials relative to higher quintiles. Consid-
ering occupational prestige as an additional source (and alternative
measure) of social distance, these results are entirely consistent with
our theoretical framework.
percentile to earnings in the 10th percentile) will be
associated with less redistribution. Our argument im-
plies that these measures of upper- and lower-half in-
equality matter jointly to middle-income support for
redistribution. Conceiving social affinity with the poor
as the inverse of social affinity with the affluent, we
imagine that middle-income voters compare income
distances in the two halves of the distribution in the
process of choosing coalition partners. An increase of
the 90–50 ratio will only have the predicted effect of
moving middle-income voters toward greater support
for redistribution insofar as it is not offset by a corre-
sponding increase of the 50–10 ratio. At the same time,
however, 90–50 and 50–10 ratios are closely correlated
across countries and over time. To address this prob-
lem, we estimate models with a measure of how the two
ratios are related to each other: the 90–50 ratio divided
by the 50–10 ratio. This measure, which we refer to
as skew, rises as dispersion in the upper half of the
earnings distribution increases relative to dispersion in
the lower half and takes on a value of 1 whenever the
90–50 and 50–10 ratios are the same. We expect skew
to be positively associated with redistribution.
5
Our approach draws on insights from recent research
on racial and ethnic group solidarity, and posits that so-
cial affinities are also based on income. We do not argue
that income is a more important basis of social affinity
than ethnicity. In our view, the relative importance of
different sources of social affinity is an open empirical
question. Relying on the stock of immigrants as the best
available proxy for the ethnic concentration of minori-
ties among the poor, our empirical analysis begins to
address this question, but our primary objective here
is to establish that income-based social affinity matters
to the politics of redistribution.
EMPIRICAL SETUP
Our main empirical analysis consists of a series of
models of redistribution (measured as the percentage
change in Gini coefficients brought about by taxes and
government transfers) and social spending (measured
in percent of gross domestic product [GDP]). Redis-
tribution is the theoretically relevant variable, but our
data on redistribution is limited and entails potential
complications. Estimating similar models with social
spending as the dependent variable provides an impor-
tant test of the robustness of our findings. In this sec-
tion, we introduce the variables included in our models
5
Collinearity precludes interacting 90–50 and 50–10 ratios, but an
interaction model would anyway be inappropriate as a test of our
theory, which does not stipulate that dispersion of the bottom half of
the distribution conditions the effect of increasing the dispersion of
the top half of the distribution, or vice versa. To our knowledge, only
two previous studies have explored separate effects of inequality in
the upper and lower halves of the distribution. Although Moene and
Wallerstein (2003) fail to find any significant difference between the
effects of low- and high-end inequality, Schwabish, Smeeding, and
Osberg (2006) report results that are quite different from ours (more
on this in what follows). Consistent with our theory, Corcoran and
Evans’ (2010) analysis of local spending on public education in the
U.S. finds that low-end inequality is associated with less spending,
whereas high-end inequality is associated with more.
4

Citations
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Journal ArticleDOI
TL;DR: This paper found that the personal experience of economic hardship, particularly the loss of a job, had a major effect on increasing support for welfare spending, and this effect was appreciably larger among Republicans than among Democrats.
Abstract: To what extent do personal circumstances, as compared to ideological dispositions, drive voters’ preferences on welfare policy? Addressing this question is difficult because a person's ideological position can be an outcome of material interest rather than an independent source of preferences. The article deals with this empirical challenge using an original panel study carried out over four years, tracking the labor market experiences and the political attitudes of a national sample of Americans before and after the eruption of the financial crisis. The analysis shows that the personal experience of economic hardship, particularly the loss of a job, had a major effect on increasing support for welfare spending. This effect was appreciably larger among Republicans than among Democrats, a result that was not simply due to a “ceiling effect.” However the large attitudinal shift was short lived, dissipating as individuals’ employment situations improved. The results indicate that the personal experience of an economic shock has a sizable, yet overall transient effect on voters’ social policy preferences.

433 citations

BookDOI
TL;DR: Bermeo and Bartels as discussed by the authors studied the dynamics of economic opinions during the Great Recession and found that people were more likely to support redistribution in the United Kingdom during the financial crisis.
Abstract: About the Contributors Chapter 1: Mass Politics in Tough Times Nancy Bermeo and Larry M. Bartels Chapter 2: Crisis of Confidence?: The Dynamics of Economic Opinions during the Great Recession Christopher J. Anderson and Jason D. Hecht Chapter 3: Political Understanding of Economic Crises:: The Shape of Resentment toward Public Employees Katherine Cramer Walsh Chapter 4: Economic Crisis and Support for Redistribution in the United Kingdom Stuart Soroka and Christopher Wlezien Chapter 5: Economic Insecurity and Public Support for the Euro: Before and During the Financial Crisis Sara B. Hobolt and Patrick Leblond Chapter 6:Attitudes toward Immigration in Good Times and Bad Rafaela Dancygier and Michael Donnelly Chapter 7: Ideology and Retrospection in Electoral Responses to the Great Recession Larry M. Bartels Chapter 8: Crisis Perceptions and Economic Voting Among the Rich and the Poor: The United Kingdom and Germany Raymond M. Duch and Inaki Sagarzazu Chapter 9: The Electoral Impact of the Crisis on the French Working Class: More to the Right? Nonna Mayer Chapter 10: The Political Consequences of the Economic Crisis in Europe: Electoral Punishment and Popular Protest Hanspeter Kriesi

178 citations

Journal ArticleDOI
Alexander Hicks1
TL;DR: This article studied the course of social welfare policy over the second half of the twentieth century in 16 nations and examined social insurance and service programs, major public expenditure and revenue aggregates, and an array of fine-grained indicators of state redistributive and safety net outcomes, from 1960 through 1994.
Abstract: This is surely the most ambitious and the most accomplished study of affluent post-World War II democratic welfare states. It uses statistical, case study, and comparative historical methods to describe and explain the course of social welfare policy over the second half of the twentieth century in 16 nations. Quantitatively, the study examines social insurance and service programs, major public expenditure and revenue aggregates, and an array of fine-grained indicators of state redistributive and safety net outcomes, from 1960 through 1994. Somewhat more qualitatively, the study extends its reach to encompass job and gender, labor market, and educational policies over the whole 1945–1996 period. Using both quantitative and qualitative methods of explanatory analysis, the work assesses various accounts of welfare state development and crisis, in particular, its authors' institutionally amplified, class-analytical political resource theory.

165 citations

MonographDOI
01 Sep 2014
TL;DR: Skills and Inequality as discussed by the authors studies the political economy of education and training reforms from the perspective of comparative welfare state research, highlighting the striking similarities between established worlds of welfare capitalism and educational regimes.
Abstract: Skills and Inequality studies the political economy of education and training reforms from the perspective of comparative welfare state research. Highlighting the striking similarities between established worlds of welfare capitalism and educational regimes, Marius R. Busemeyer argues that both have similar political origins in the postwar period. He identifies partisan politics and different varieties of capitalism as crucial factors shaping choices about the institutional design of post-secondary education. The political and institutional survival of vocational education and training as an alternative to academic higher education is then found to play an important role in the later development of skill regimes. Busemeyer also studies the effects of educational institutions on social inequality and patterns of public opinion on the welfare state and education. Adopting a multi-method approach, this book combines historical case studies of Sweden, Germany, and the United Kingdom with quantitative analyses of macro-level aggregate data and micro-level survey data.

154 citations

References
More filters
Book
01 Jan 2001
TL;DR: This is the essential companion to Jeffrey Wooldridge's widely-used graduate text Econometric Analysis of Cross Section and Panel Data (MIT Press, 2001).
Abstract: The second edition of this acclaimed graduate text provides a unified treatment of two methods used in contemporary econometric research, cross section and data panel methods. By focusing on assumptions that can be given behavioral content, the book maintains an appropriate level of rigor while emphasizing intuitive thinking. The analysis covers both linear and nonlinear models, including models with dynamics and/or individual heterogeneity. In addition to general estimation frameworks (particular methods of moments and maximum likelihood), specific linear and nonlinear methods are covered in detail, including probit and logit models and their multivariate, Tobit models, models for count data, censored and missing data schemes, causal (or treatment) effects, and duration analysis. Econometric Analysis of Cross Section and Panel Data was the first graduate econometrics text to focus on microeconomic data structures, allowing assumptions to be separated into population and sampling assumptions. This second edition has been substantially updated and revised. Improvements include a broader class of models for missing data problems; more detailed treatment of cluster problems, an important topic for empirical researchers; expanded discussion of "generalized instrumental variables" (GIV) estimation; new coverage (based on the author's own recent research) of inverse probability weighting; a more complete framework for estimating treatment effects with panel data, and a firmly established link between econometric approaches to nonlinear panel data and the "generalized estimating equation" literature popular in statistics and other fields. New attention is given to explaining when particular econometric methods can be applied; the goal is not only to tell readers what does work, but why certain "obvious" procedures do not. The numerous included exercises, both theoretical and computer-based, allow the reader to extend methods covered in the text and discover new insights.

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TL;DR: In this paper, a self-categorization theory is proposed to discover the social group and the importance of social categories in the analysis of social influence, and the Salience of social Categories is discussed.
Abstract: 1. Introducing the Problem: Individual and Group 2. Rediscovering the Social Group 3. A Self-Categorization Theory 4. The Analysis of Social Influence 5. Social Identity 6. The Salience of Social Categories 7. Social Identity and Group Polarization 8. Crowd Behaviour as Social Action 9. Conclusion.

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"The Structure of Inequality and the..." refers background in this paper

  • ...Positing that social identities are defined by selfcategorization into groups and that there are multiple groups with which any given individual might identify (see Turner et al. 1987), Shayo (2009) argues that individuals choose to identify with one or another group—say, their class or their nation—based on (1) perceived social distance to the prototypical member of each group, and (2) the relative status of the group in question....

    [...]

  • ...…identities are defined by selfcategorization into groups and that there are multiple groups with which any given individual might identify (see Turner et al. 1987), Shayo (2009) argues that individuals choose to identify with one or another group—say, their class or their nation—based on (1)…...

    [...]

Journal ArticleDOI
TL;DR: The Im-Pesaran-Shin (IPS) test as discussed by the authors relaxes the restrictive assumption of the LL test and is best viewed as a test for summarizing the evidence from independent tests of the sample hypothesis.
Abstract: The panel data unit root test suggested by Levin and Lin (LL) has been widely used in several applications, notably in papers on tests of the purchasing power parity hypothesis. This test is based on a very restrictive hypothesis which is rarely ever of interest in practice. The Im–Pesaran–Shin (IPS) test relaxes the restrictive assumption of the LL test. This paper argues that although the IPS test has been offered as a generalization of the LL test, it is best viewed as a test for summarizing the evidence from a number of independent tests of the sample hypothesis. This problem has a long statistical history going back to R. A. Fisher. This paper suggests the Fisher test as a panel data unit root test, compares it with the LL and IPS tests, and the Bonferroni bounds test which is valid for correlated tests. Overall, the evidence points to the Fisher test with bootstrap-based critical values as the preferred choice. We also suggest the use of the Fisher test for testing stationarity as the null and also in testing for cointegration in panel data.

6,652 citations


"The Structure of Inequality and the..." refers methods in this paper

  • ...We used an augmented Dickey-Fuller test to look for a trending nonstationary process in our data (Maddala and Shaowen 1999)....

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Journal ArticleDOI

6,503 citations


"The Structure of Inequality and the..." refers background in this paper

  • ...Given the number of observations per country in our data set, however, we cannot simultaneously include both the lagged dependent variable and country fixed effects (Nickell 1981)....

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Frequently Asked Questions (7)
Q1. What have the authors contributed in "The structure of inequality and the politics of redistribution" ?

In addition, the authors present survey evidence on preferences for redistribution among middle-income voters that is consistent with their theory and regression results indicating that the left parties are more likely to participate in government when the structure of inequality is characterized by skew. 

One hypothesis to be explored in future work is that center-right parties adjust strategically to the advantages that center-left parties enjoy when the structure of inequality is skewed, pursuing more redistributive policies. Although the authors do not believe that governments are exclusively responsive to the policy preferences of middle-income voters, it seems reasonable to suppose that middle-income voters play a pivotal role in coalitional politics. Their preliminary analysis of survey data suggests that the structure of inequality shapes the preferences of middle-income voters and that these preferences in turn impact government policy. Further analysis of individual preferences constitutes an obvious next step that the authors intend to pursue. 

In several of these countries—notably, Australia, France, Ireland, and Switzerland—government policy appears to have become more redistributive relative to countries in which earnings skew has remained stable. 

As Piketty and Saez (2003) suggest, the rapid growth of corporate compensation, linked to the dynamics of equity markets, constitutes yet another possible factor behind changes in the structure of earnings inequality over the past two decades. 

With redistribution as the dependent variable, introducing government partisanship into their models does not noticeably alter the estimated effects of skew. 

A number of recent crossnational studies indicate that relative income mobility tends to decline with aggregate inequality (Aaberge et al. 

In particular, the authors expect middleincome voters to empathize with the poor (or affluent) to the extent that they live in the same neighborhoods, send their children to the same schools, and circulate within the same social networks (McPherson, SmithLovin, and Cook 2001).