Inequality Aversion and Preferences for Redistribution: New Tests of Political Economy Theories

To what extent do preferences for redistribution reflect the private self-interest of the voter? Many political economy models assume that once private self-interest is properly accounted for, the residual variation in preferences for redistribution is negligible. Many theories outside of the traditional political economy literature assume that private self-interest is one among several motivations to support or oppose redistribution. The primary goal of this paper is to provide compelling empirical evidence for the latter view. To do so, it simultaneously models preferences for domestic redistribution, progressive taxation, and international redistribution, using a newly-developed quantitative method. If preferences for redistribution were merely private self-interest, then no one in a wealthy country would support international redistribution. In fact, there is considerable within-country variation in preferences for international redistribution, and the new quantitative method demonstrates that preferences for international redistribution covary with preferences for domestic redistribution and progressive taxation, even after controlling for private self-interest. Moreover, the within-country variation in preferences for domestic redistribution that is attributable to private self-interest is small relative to the total amount of systematic, within-country variation in preferences for domestic redistribution across more than twenty advanced industrial and Eastern Europen countries. This empirical finding should encourage political economists to rethink the standard theoretical model(s) for policy preferences. In short, there is more to be gained from a better understanding of the variance in preferences attributable to non-economic motivations, a topic where this paper only scratches the surface. Experiments in neuroscience, economics, psychology are begining to provide a clearer picture of these non-economic motivations, which should help political economists integrate these insights into a theoretical model that makes testable predictions about policy in equilibrium.