Project 4Is investigates the determinants and patterns of inequality as well as citizen’s preferences for redistribution and the mix of welfare services. It aims to explain how citizens’ preferences are formed, and how long-term income expectations affect these preference.
The latest project Working Paper by researcher Daniel Stegmueller on “The Dynamics of Income Expectations and Redistribution Preferences” sheds light at exactly these effects of long-term income expectations and argues that they are central to redistributive preferences. While it is an accepted fact in political economy models that individuals’ income shapes their preferences for redistribution, the paper finds that expectations about future are in fact more important in shaping preferred levels of redistribution than is the current position in the income distribution. The paper extends conventional economic models by accounting for individuals’ consideration of the future when forming their present-day preferences over redistributive policy, recognising that individuals act as forward-looking economic agents. Stegmueller’s argument is based on a quantitative case study of the UK, using data from the British Household Panel Study from 1991 to 2007. He develops a Bayesian simultaneous dynamic panel model which jointly models the process of individuals’ income dynamics, their future expected income, and their preferred level of redistribution. This model shows that rising expected income is systematically related to lower preferred levels of redistribution, and that this effect is even more pronounced than the role of current income.
Read the full paper at welfarestatefutures.org/working-papers