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Should Income Inequality Be Reduced and Who Should Benefit?
Redistributive Preferences in Europe and Central Asia
Alexandru Cojocaru Mame Fatou Diagne 1
World Bank World Bank
JEL codes: D63, I32, P20
Keywords: Transition Economies, preferences for redistribution, inequality, mobility
1
The World Bank. 1818 H Street, NW, Washington D.C., mfdiagne@worldbank.org and acojocaru@worldbank.org
The findings, interpretations and conclusions in this paper are entirely those of the authors and not those of the
World Bank, its Executive Directors, or the countries they represent. We are grateful to Joao Pedro Wagner de
Azevedo, Andrew Clark, Carolina Sanchez, Sarosh Sattar, Paolo Verme, Nobuo Yoshida and participants of World
Bank seminars for helpful comments and remarks. All remaining errors are ours alone.
1. Introduction
High income inequality can affect individual welfare in multiple ways, including by influencing
tax rates, investment in human and physical capital and economic growth (Alesina and Rodrik,
1994; Persson and Tabellini, 1991) or through its effects on collective action and the provision of
public goods (Bardhan, Ghatak and Karaivanov, 2007), or crime (Ehrlich, 1973). It can also
directly affect reported happiness: Alesina, Di Tella and MacCulloch (2003) find, for example, a
large negative effect of inequality on happiness in Europe, but not in the US (where social
mobility is perceived to be higher).
It is therefore to be expected that individuals may have preferences over the distribution of
income in society. Such preferences (based on perceptions of inequality – and beliefs on what
governments should do about it) may translate into actual policies depending on the political
model that applies in any given country, whether the median voter theorem holds, or whether
economic elites or interest groups drive policy outcomes. 2 To the extent that individual
redistributive preferences have an influence on redistributive policies, differences in who
supports income redistribution, for whom and why can lead to different equilibrium levels of
inequality and redistribution in society.
This paper examines redistributive preferences across transition countries of Europe and Central
Asia, and contrasts transition countries with a number of countries in Western Europe. It assesses
the degree of inequality aversion and support for various redistributive policies across transition
countries, and examines the characteristics of those supporting a reduction in inequality and
greater assistance to the poor. In addition, the paper tests various explanations for redistributive
preferences (including past mobility, aspirations for future mobility, beliefs about fairness, the
impact of the recent financial crisis, and the degree of risk aversion of the respondents) in Europe
and Central Asia, using a single survey instrument (the Life in Transition Survey). It also
analyzes preferences for redistribution to specific population groups, which also sheds light on
the motives of individual support for redistribution.
The paper is structured as follows. Section 2 reviews various explanations for redistributive
preferences in economic theory and literature, and presents the empirical approach for testing
these hypotheses in this paper. Section 3 presents the data and descriptive statistics at the country
level. Section 4 discusses the results of the empirical analysis of individual support for reducing
inequality and preferences for redistribution to specific groups. Section 5 concludes.
2. Explaining preferences for redistribution: Theory and empirical approach
2
For example, in the U.S., Gilens and Page (2014) reject the hypothesis that ordinary citizens have unique,
substantial power over policy decisions and finds that they have little or no independent influence on policy. Instead,
to the extent their preferences are reflected in policy, it is because they are positively correlated with those of
economic elites.
2
Empirical studies show that preferences for redistribution vary according to socio-demographic
characteristics such as age, gender, education and employment status. Alesina and Giuliano
(2009) find, based on US data from the General Social Survey, but also based on international
data from the World Values Survey, that preferences for redistribution increase concavely with
age, are higher among women, and among the unemployed. At the same time, being married, and
a higher level of education have a negative association with preferences for redistribution.
Broadly similar findings are reported by Corneo and Gruner (2002) and by Bernasconi (2006)
based on data from the International Social Survey Programme (ISSP), and by Luttmer and
Singhal (2011) based on data from the European Social Survey (ESS). On the other hand,
Gaviria, Graham and Braido (2007), analyzing data from the Latinobarometro survey, find that
preferences for redistribution do not vary substantially according to age or marital status,
although they also find a lower preference for redistribution among women.
A detailed review of theoretical approaches to modelling redistributive preferences is provided
by Alesina and Giuliano (2009). In particular they highlight four types of models: (i) static
models such as the one put forth by Meltzer and Richard (1981) where individuals only care
about their consumption and differ in their productivity levels; the equilibrium tax rate then
depends on the difference between the productivities of the average and median voters; (ii)
dynamic models such as the one proposed by Benabou and Ok (2001) in which expected future
mobility has an effect on current preferences for redistribution; (iii) models in which inequality
enters indirectly into the utility function, because of various factors such as, for instance, crime,
incentive effects, or externalities in education; and (iv) models in which inequality enters directly
into the utility function, i.e. individuals may have particular concepts of social justice (e.g.
libertarian, Rawlsian) which determine the degree of their intrinsic aversion to inequality. Some
other models have also highlighted the importance of past mobility, because of reasons of
dynastic learning (Piketty, 1995), as well as that of social competition and beliefs about the
fairness of the distribution of fortunes on society (Alesina and Angeletos, 2005).
A number of recent empirical studies confirm these predictions from theoretical models. In
particular, redistributive preferences have been found to be influenced by factors such as beliefs
about hard work and luck, perceptions of fairness, past mobility, religion, political ideology,
attitudes toward markets, cultural norms, or attitudes toward risk (Corneo and Gruner 2001;
Fong 2001; Alesina and La Ferrara 2005; Alesina and Guiliano 2009; Luttmer and Singhal 2011;
Cojocaru 2014a,b). Although some of these studies include a few Eastern European countries,
there is little evidence on the demand for redistribution in transition countries. 3
In this paper, we use the Life in Transition survey allows to empirically test all of the above
theoretical propositions based on comparable data from a large set of countries. The paper
3
The ESS data used by Luttmer and Singhal (2011) includes 11 countries (of which all except Russia and Ukraine
are currently EU members), but their analysis does not focus on the specificity of transition Economies. Cojocaru
(2014b) also analyzes data from the Life in Transition Survey, but focuses primarily on the prospects of upward
mobility (POUM) hypothesis.
3
assesses the extent to which the variation in the attitudes toward income inequality and assistance
to the poor can be attributed to differences in core socio-demographic characteristics such as age,
sex, level of education and employment status, but also to a number of beliefs about the
institutional environment in the respondents’ country of residence. In particular, we examine:
Past social mobility, based on the respondent’s reported location on the society’s social
ladder today, and four years ago 4;
Expectations of future social mobility, based on the respondent’s reported location on the
society’s social ladder today, and expected location on the ladder 4 years into the future;
Beliefs about the determinants of need and success in society:
o Respondents were asked to indicate the most important factor for success in life
(effort and hard work, intelligence and skills, political connections, or breaking
the law);
o Respondents were asked to indicate the most important determinant of need in
society (bad luck, laziness, injustice, inevitable part of modern life);
Degree of risk aversion, based on a hypothetical scenario. 5
Finally, to further explore the drivers of redistributive preferences, we also consider preferences
for redistribution to specific groups, such as the disabled, families with children, the elderly, the
working poor, the unemployed, and war veterans.
For comparative purposes, we present results for the pooled sample as well as three groups of
countries: Western Europe, transition economies that have joined the European Union (“new”
EU member states), and transition economies that are not part of the European Union.
3. Data and summary statistics
The analysis is based on the 2006 and 2010 rounds of the Life in Transition Survey (LITS). The
LiTS provides harmonized data based on a single survey instrument for 30 transition countries.
In addition, 5 countries in Western Europe were added in the second round of the survey in 2010
(France, Germany, Great Britain, Italy and Sweden). The sample was drawn to make the survey
4
The question is phrased as follows: “Please imagine a ten-step ladder where on the bottom, the first step, stand the
poorest 10% people in our country, and on the highest step, the tenth, stand the richest 10% of people in our country.
On which step of the ten is your household today?” This is followed by the question: “Now imagine the same ten-
step ladder 4 years ago. On which step was your household at that time?”
5
“I will now ask you another hypothetical question. Imagine that you are a farmer. If all goes well, you expect to
sell your harvest for [INSERT COUNTRY SPECIFIC AMOUNT] in a few more months. However, there is a risk:
If there is a drought the harvest will be lost --this has happened to your neighbors in half of the recent years. You
consider installing an irrigation system which would protect your crop in case of a drought, but it costs [INSERT
COUNTRY SPECIFIC AMOUNT] and you would need to sell your car to buy it. Which of the following is more
likely to be your decision?” I would take the risk and hope there is no drought or I would sell my car and buy an
irrigation system.
4
representative of the adult population in each country. 6 A net sample size of approximately 1,000
households was selected in each of the countries, although in several countries this net sample
size was boosted to 1,500 in 2010 (Serbia, Poland, Russia, Ukraine, Uzbekistan and Great
Britain).
In addition to information on opinions and attitudes in Europe and Central Asia, the LiTS also
contains data on household welfare and individual characteristics. We construct, for the pooled
sample and separately for each country, an asset index as a measure of household welfare (see
Cojocaru and Diagne, 2014). The asset index is based on household ownership of the following
items: a car, a secondary residence, a bank account, a debit card, a credit card, a mobile phone, a
computer, access to internet at home, and household access to water, electricity, a fixed
telephone line, central heating, public (piped) heating, and pipeline gas. The asset index is based
on a linear combination of household asset ownership and housing characteristics. Principal
components analysis (PCA) is used to derive weights (Filmer and Pritchett, 2001).
Table 1 shows summary statistics for the main variables considered in this paper.
6
The sample design for the two surveys was a two-stage cluster sample design within each country. In the first
stage, primary sampling units (PSUs) were randomly selected systematically according to a probability
proportionate to their size (population 18 and older). In the second stage, 20 households were randomly selected
from each of the selected PSUs.
5
Table 1. Summary statistics
Variable Obs Mean St. dev. Min Max
The gap between the rich and the poor should be reduced
strongly disagree 35364 0.024 0.153 0 1
disagree 35364 0.061 0.239 0 1
neither agree nor disagree 35364 0.136 0.342 0 1
agree 35364 0.430 0.495 0 1
strongly agree 35364 0.350 0.477 0 1
Inequality preference (1-10) 35417 6.638 2.717 1 10
Assisting the poor (1st or 2nd priority of Government) 36796 0.258 0.437 0 1
Age
18-24 36796 0.068 0.252 0 1
25-34 36796 0.183 0.386 0 1
35-44 36796 0.199 0.400 0 1
45-54 36796 0.179 0.383 0 1
55-64 36796 0.139 0.346 0 1
65+ 36796 0.232 0.422 0 1
Education
Primary or less 36786 0.101 0.302 0 1
Secondary 36786 0.464 0.499 0 1
Post-secondary 36786 0.435 0.496 0 1
Employed 36796 0.534 0.499 0 1
Married 36796 0.552 0.497 0 1
Not religious 36796 0.129 0.335 0 1
Household with no children 36796 0.679 0.467 0 1
Rural 36796 0.355 0.478 0 1
HH has a business 36796 0.136 0.343 0 1
Self-employed 36796 0.081 0.273 0 1
Main income: pensions or state benefits 36796 0.337 0.473 0 1
Key determinant of success
Effort and hard work 36796 0.456 0.498 0 1
Intelligence and skills 36796 0.282 0.450 0 1
Political connections 36796 0.129 0.335 0 1
Breaking the law 36796 0.063 0.242 0 1
Other (specify) 36796 0.070 0.255 0 1
Key determinant of need in society
Unlucky 36796 0.090 0.287 0 1
Laziness and lack of willpower 36796 0.225 0.418 0 1
Injustice in our society 36796 0.428 0.495 0 1
Inevitable part of modern life 36796 0.181 0.385 0 1
Other 36796 0.076 0.264 0 1
Welfare ladder (past) 34974 4.747 1.795 1 10
Welfare ladder (present) 35230 4.485 1.696 1 10
Welfare ladder (future) 30300 4.839 1.994 1 10
Not affected by crisis 34542 0.348 0.476 0 1
Degree of risk aversion
Risk-loving (would take risk of drought) 36796 0.319 0.466 0 1
Risk-averse (would sell car and buy irrigation equipment) 36796 0.524 0.499 0 1
Do not know 36796 0.158 0.364 0 1
Markets always preferable 36796 0.340 0.474 0 1
Source: LiTS II. Notes: Weighted estimates
6
Subjective preferences for redistribution
The analysis focuses on a set of questions in the LiTS survey aimed at eliciting the respondent’s
views on economic inequality, government’s policy priorities, and on the importance of support
(both personal and by the government) to the poor and various groups. Taken together, responses
to these questions can be viewed as a proxy for unobserved preferences over redistributive policy
in the region. Two questions elicit the degree of inequality aversion of the respondent:
(i) Respondents were asked to what extent they agreed or disagreed with the statement:
The gap between the rich and the poor in our country should be reduced.
(ii) Respondents were asked to indicate whether they thought that “Incomes should be
made more equal” or that “We need larger income differences as incentives for
individual effort”.
The analysis of the above measures is supplemented by the following measures eliciting the
respondent’s views on government support to the poor:
(iii) Respondents were asked to identify what should be the first and second priorities for
extra government spending (choosing between education, healthcare, housing,
pensions, assisting the poor, the environment, public infrastructure, etc.).
(iv) Respondents were asked whether they would be willing to give part of their income
or pay more taxes for various public policy objectives, including to “help the needy”.
(v) Finally, support for redistribution for specific groups was elicited by asking “which
groups of citizens deserve support from the government”, possible answers including:
elderly, disabled, families with children, war veterans, working poor, unemployed, or
nobody.
While the literature refers to both questions (i) and (ii) as measures of inequality aversion
(mostly without distinguishing between them), they may reflect and be driven by very different
factors. The correlation between responses to question (i) and (ii) is weak. On average, the
individual correlation coefficient between the 1-10 step inequality measure and the 5-step
inequality measure is about 13 percent, with the highest correlation in the countries of Western
Europe. 7 Quite likely, the important difference between the two questions is the fact that the
former is framed in terms of helping the poor catch up and the latter suggests that higher
inequalities can have beneficial effects by incentivizing effort, and also refers to “making
7
The countries with highest correlation are Germany (42%), Czech Republic (35%), France (31%), Sweden (31%)
and the UK (30%).
7
incomes more equal”, which is a more neutral statement than “bridging the gap between the rich
and the poor.” 8 In section 4, we examine inequality aversion as measured by the two questions.
The importance of framing the question for eliciting the respondents’ preferences for
redistribution is also confirmed by observing the weak correlation of (i) and (ii) with the belief
that assisting the poor should be among the top two priorities for extra government spending.
Preferences for stronger government involvement in helping the poor appear to be slightly better,
but still weakly aligned with the respondents’ own willingness to help either by giving part of
their income or to pay higher taxes, and with the belief that the (working) poor deserve
government support.
Trends in inequality aversion
Comparing levels of inequality aversion across the two rounds of the survey, these preferences
are not stable, which does not suggest a model of preferences determined by stable social norms.
While the preference for reducing the gap between the rich and the poor remains widespread in
the region, it decreased markedly during the 2006-2010 period. Overall, in 2010, 70 percent of
adults agreed that the gap between the rich and the poor should be reduced, versus 79 percent in
2006 for the same sample of countries 9. The decline in the preference for redistribution can be
observed in the majority of the countries in the LiTS sample (see Figure 1).
8
This would be in line with the findings of Pirttila and Uusitalo (2010) who find based on household survey data
from Finland that two scenarios, one based on comparisons of income distributions, and one based on costly
transfers from the rich to the poor, generate rather different estimates of the degree of inequality aversion.
9
Five Western European countries (France, Germany, Italy, UK, and Sweden), and, additionally, Kosovo, are
included in the 2010 data, but not in the 2006 data.
8
Figure 1: Evolution of the preference for a smaller gap between the rich and the poor in
Europe and Central Asia, 2006-2010
The gap between the rich and the poor should be reduced
(Share of adults who either agree or strongly agree)
2006 2010
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Ukraine
BiH
Armenia
Tajikistan
Croatia
Montenegro
Russia
Slovakia
Sweden
Germany
Moldova
UK
Latvia
Slovenia
Poland
Romania
Belarus
France
Lithuania
Total
Albania
Turkey
Hungary
Czech
Kyrgyzstan
Bulgaria
Uzbekistan
Kosovo
Mongolia
Italy
FYROM
Georgia
Serbia
Azerbaijan
Kazakhstan
Estonia
Different possible theories may be offered to explain the observed trends, but none are fully
consistent with the observed data. Lower support for reducing inequality could be related to
changes in beliefs related to past or recent experience with income shocks, or changes in
expectations about future social mobility as a result of the economic context. Between 2006 and
2010, most countries in the region experienced solid economic growth, followed by a deep
recession in 2008-2009. However, across countries, there does not seem to be a clear link
between the changes in expressed inequality aversion and the crisis. 10, 11
Inequality aversion and redistributive preferences across countries
In 2010, the preference for a smaller gap between the rich and the poor was higher in Western
Europe as compared with transition countries. Taking the 5 Western European countries in the
10
Among the countries where support for reducing inequality declined most are countries that experienced large
drops in output during the crisis: GDP fell by 6 percent in Moldova, 14 percent in Armenia and 15 percent in
Ukraine in 2009. Conversely, Belarus, Azerbaijan, Albania and Kazakhstan, countries that experienced some of the
largest reductions in the preference of a smaller gap between the rich and poor – weren’t affected as much by the
recent financial crisis (all of these countries experienced positive economic growth in 2009). Similarly, in countries
like Latvia and Lithuania, where GPD fell by 18 and 15 percent respectively in 2009, the preference vis-à-vis the
size of the gap between the rich and the poor remained largely unchanged during the period.
11
Despite the increased emphasis on inequality in the popular press in the aftermath of the recent financial crisis,
only a few studies look explicitly at the link between the crisis and preferences for redistribution, with mixed results.
Margalit (2013) finds negative income and employment shocks to be associated with increased support for social
safety nets. Fisman, Jakiela and Kariv (2014) experimentally create recessionary conditions in generalized dictator
games and find that the economic downturn makes participants put a greater emphasis on efficiency versus equality.
9
sample (France, Germany, Italy, Sweden and the UK), 84 percent of the adult population in this
group either agreed or strongly agreed that the gap between the rich and the poor should be
reduced, compared to 72 percent in the new EU Member States and 74 percent in the non-EU
Transition Economies. In the western European sample, the preference for equality was strongest
in France (where 88 percent of adults agreed or strongly agreed that the gap between the rich and
the poor should be reduced) and weakest in Sweden and the United Kingdom (where 79 percent
of adults expressed a similar preference).
Among transition economies, the belief that the gap between the rich and the poor should be
reduced is more widespread in the Former Yugoslavian states (with the exception of Bosnia and
Herzegovina) and in the Baltics. It is also high in Uzbekistan and especially in Georgia, which
tops the list of LiTS countries in 2010. Western CIS countries (Belarus, Moldova, Ukraine) are at
the other end of the spectrum, with low average preference for redistribution. In three countries
(Azerbaijan, Belarus and the Czech Republic) the share of those who agreed or strongly agreed
that the gap between the rich and the poor should be reduced was below 60 percent. Differences
across countries are only weakly correlated with average beliefs on the determinants of need
(luck, laziness or injustice) or on whether effort drives success.
Cross-country differences in support for reducing inequality can be related to existing differences
in inequality or to differences in the extent of actual income redistribution across countries. We
plot the proportion of people who agree that incomes should be more equal against income
inequality in the countries in our sample, measured by the Gini coefficient. Among European
countries, agreement that incomes should be made more equal is generally higher in more
unequal countries (Figure 2). However, as could be expected, this relationship is not linear. In
countries where there is a high degree of inequality aversion, this can have led (through the
political process) to high income redistribution through government policies and therefore
resulted in low levels of income inequality. At the same time, despite aversion for income
inequality, respondents may believe that there is no need for further redistribution or more
reduction in income inequality because their preferences have already been incorporated in
government policies and they are satisfied with the outcome. This can be seen more clearly by
considering beliefs on priorities for future government policy. We plot the proportion of people
who think that assisting the poor should be the first priority of the government against the extent
of income redistribution achieved by the country. The latter is measured by taking the difference
between the income Gini before and after social transfers. This is an imperfect measure of the
extent of income redistribution across countries, as it does not include the effect of taxes on
income distribution, which is important in many European countries. As can be seen in Figure 3,
where current income redistribution through government transfers is highest (for example in
Sweden or the Czech Republic), fewer people think assisting the poor should be the first priority
of the government.
10
Figure 2: Income inequality and support for Figure 3: Extent of income redistribution
reducing inequality through public transfers and support for
assisting the poor as the first government
priority
.25
RUS
40
HUN
LVA
DEU
LTU SWE SRB
.2
35
ROM GBR
MDA FRA
CZE
BGR POL
UKR
ROM SVN
KSV GBR BLR ITA
SVK
Red_Gini
ITA POL EST
.15
Gini
HRV
30
FRA LTU
DEU EST
BGR
SRB
HRV
UKR MDA RUS
ARM
.1
CZE
25
SVK HUN SWE LVA
ALB MKD
TUR
SVN GEO
BIH
.05
20
KSV
3 4 5 6 7 0 .1 .2 .3 .4
Income should be more equal Assisting the poor should be the priority nb 1 of the Gvt
Source: LITS II, WDI Source: LITS II, WDI
Support for specific groups
Generally speaking, there is a high degree of agreement that the disabled and the elderly deserve
support from government: overall, 75 percent of respondents believe that the disabled deserve
government support, and 71 percent that the elderly deserve government support. Support for
redistribution for other groups is weaker: 64 percent agree that families with children should be
supported, 53 percent for the working poor, 44 percent for the unemployed and 43 percent for
war veterans (table 2).
11
Table 2: Which groups deserve support from the government?
families with
disabled elderly children working poor unemployed war veterans nobody
EU
France 0.78 0.66 0.44 0.71 0.40 0.20 0.02
Sweden 0.83 0.73 0.52 0.56 0.70 0.29 0.01
Germany 0.67 0.48 0.77 0.55 0.42 0.27 0.02
Italy 0.59 0.68 0.52 0.58 0.61 0.12 0.01
Great Britain 0.70 0.79 0.47 0.60 0.31 0.66 0.01
NEW EU
Latvia 0.86 0.80 0.87 0.55 0.52 0.43 0.00
Bulgaria 0.82 0.81 0.74 0.51 0.61 0.30 0.00
Czech Rep. 0.81 0.80 0.77 0.40 0.31 0.23 0.02
Slovenia 0.80 0.74 0.76 0.81 0.55 0.31 0.00
Slovakia 0.77 0.80 0.85 0.62 0.42 0.27 0.01
Romania 0.75 0.87 0.65 0.53 0.48 0.45 0.00
Lithuania 0.74 0.74 0.76 0.55 0.51 0.24 0.01
Estonia 0.74 0.64 0.83 0.50 0.59 0.28 0.00
Croatia 0.71 0.70 0.53 0.49 0.64 0.35 0.00
Poland 0.64 0.56 0.48 0.37 0.30 0.22 0.00
Hungary 0.63 0.67 0.78 0.52 0.49 0.30 0.02
NON EU
Moldova 0.95 0.97 0.94 0.75 0.68 0.92 0.00
Kyrgyzstan 0.93 0.83 0.62 0.32 0.47 0.58 0.00
Montenegro 0.91 0.88 0.57 0.60 0.64 0.46 0.01
Kosovo 0.90 0.82 0.67 0.69 0.91 0.81 0.00
Ukraine 0.89 0.79 0.80 0.46 0.47 0.66 0.01
Tajikistan 0.88 0.78 0.57 0.55 0.36 0.60 0.00
Macedonia 0.87 0.64 0.66 0.73 0.88 0.51 0.01
Mongolia 0.85 0.77 0.49 0.46 0.34 0.39 0.01
Georgia 0.84 0.83 0.59 0.31 0.59 0.52 0.00
Belarus 0.84 0.68 0.78 0.48 0.26 0.60 0.00
Uzbekistan 0.82 0.66 0.65 0.40 0.45 0.45 0.00
Serbia 0.82 0.76 0.70 0.62 0.71 0.54 0.00
Azerbaijan 0.81 0.74 0.66 0.59 0.79 0.63 0.00
Kazakhstan 0.80 0.74 0.60 0.37 0.41 0.57 0.00
Turkey 0.80 0.77 0.65 0.74 0.70 0.67 0.01
Bosnia and
Herzegovina 0.79 0.85 0.59 0.55 0.80 0.58 0.00
Russia 0.76 0.75 0.73 0.40 0.29 0.49 0.00
Armenia 0.76 0.82 0.73 0.55 0.61 0.67 0.00
Albania 0.75 0.75 0.45 0.60 0.65 0.27 0.00
Total 0.75 0.71 0.64 0.53 0.44 0.43 0.01
Legend: Between 0 and 0.25 Between 0.25 and 0.5 Between 0.5 and 0.75 More than 0.75
Source: LITS II
12
Table 3. Which group deserves most support from the government?
families
with working
disabled children elderly poor unemployed war veterans nobody
EU
France 0.31 0.14 0.14 0.31 0.07 0.00 0.02
Sweden 0.30 0.14 0.23 0.10 0.19 0.00 0.01
Germany 0.20 0.52 0.07 0.12 0.06 0.01 0.02
Italy 0.18 0.18 0.24 0.13 0.25 0.00 0.01
Great Britain 0.16 0.15 0.30 0.19 0.05 0.13 0.01
NEW EU
Poland 0.36 0.22 0.23 0.08 0.06 0.02 0.00
Czech Republic 0.31 0.36 0.24 0.04 0.02 0.01 0.02
Bulgaria 0.26 0.29 0.25 0.05 0.14 0.00 0.00
Romania 0.26 0.22 0.34 0.10 0.06 0.03 0.00
Croatia 0.23 0.20 0.19 0.09 0.22 0.05 0.00
Lithuania 0.22 0.36 0.21 0.08 0.10 0.01 0.01
Latvia 0.21 0.41 0.21 0.03 0.11 0.02 0.00
Estonia 0.18 0.46 0.09 0.09 0.15 0.00 0.00
Slovakia 0.17 0.45 0.19 0.11 0.05 0.00 0.01
Slovenia 0.15 0.29 0.14 0.30 0.10 0.02 0.00
Hungary 0.14 0.45 0.21 0.08 0.08 0.01 0.02
NON EU
Kyrgyzstan 0.50 0.14 0.16 0.03 0.09 0.09 0.00
Mongolia 0.45 0.11 0.19 0.14 0.09 0.02 0.01
Tajikistan 0.42 0.09 0.21 0.13 0.07 0.05 0.00
Montenegro 0.42 0.10 0.17 0.07 0.21 0.01 0.01
Kazakhstan 0.39 0.19 0.17 0.07 0.07 0.10 0.00
Georgia 0.35 0.13 0.28 0.01 0.19 0.04 0.00
Uzbekistan 0.35 0.23 0.11 0.09 0.15 0.05 0.00
Macedonia 0.35 0.09 0.07 0.08 0.37 0.03 0.01
Belarus 0.34 0.36 0.12 0.07 0.03 0.08 0.00
Ukraine 0.33 0.28 0.19 0.05 0.07 0.07 0.01
Kosovo 0.31 0.06 0.11 0.06 0.33 0.13 0.00
Azerbaijan 0.31 0.13 0.14 0.07 0.27 0.08 0.00
Moldova 0.30 0.14 0.40 0.05 0.06 0.04 0.00
Serbia 0.29 0.23 0.14 0.10 0.20 0.03 0.00
Albania 0.28 0.11 0.19 0.12 0.27 0.02 0.00
Russia 0.27 0.33 0.21 0.07 0.03 0.08 0.00
Armenia 0.25 0.20 0.28 0.04 0.13 0.07 0.00
Bosnia and
Herzegovina 0.25 0.09 0.22 0.05 0.34 0.04 0.00
Turkey 0.23 0.09 0.15 0.19 0.20 0.13 0.01
Total 0.26 0.26 0.19 0.12 0.10 0.05 0.01
Legend: Between 0 and 0.1 Between 0.1 and 0.2 Between 0.2 and 0.4 More than 0.4
Source: LITS II
13
When asked which group of citizens deserves most support from the government, respondents
have a preference for the disabled and families with children (26 percent on average), followed
by the elderly (19 percent), the working poor (12 percent), the unemployed (10 percent) and war
veterans (5 percent) (table 3). There is wide variation across countries in the extent of support for
various groups, although there is general agreement that the disabled deserve support.
Support for income redistribution towards specific groups also seems to translate into actual
redistributive policies. Spending for social pensions (as a share of total government expenditure)
tends to be higher in countries where there is wide agreement that the elderly deserve support
from the government (Figure 4). Likewise, within the transition region, there is higher spending
on family allowances where there is strong agreement that families with children deserve support
from government (Figure 5).
Figure 4: Belief that the elderly deserve Figure 5: Belief that families with children
public support and spending on social deserve public support and spending on
pensions social pensions
.06
UKR
Spending for families allowances as % of Budget
.4
Spending for social pensions as % of Budget
HUN
FRA SWE
.3
LVA ROM
.04
BGR
TUR ROM
SRB BGR UKR LVA
MKD
ARM GBR
EST MTG
.2
CZE
SVN
MDA SRB BLR
LTU
ALB
ITA
BLR
KAZ
.02
EST
BIH
AZE POL KAZ
.1
KSV
SWE ARM MDA
ITA TJK
GBR MKD
MTGBIH
LTU CZE TUR
POL FRA
HUN SVN TJK AZE
KGZ
0
0
.6 .7 .8 .9 1 .4 .6 .8 1
percentage of people who support the Elderly in the country percentage of people who support the families with children in the country
Source: LITS II, WB ECA social protection database Source: LITS II, WB ECA social protection database
However, average preferences and actual redistributive policies are not necessarily aligned. For
example, budget spending on social assistance is not systematically higher where a greater
proportion of people think that assisting the poor should be among the first two government
priorities for spending (Figure 6).
14
Figure 6: Support for assisting the poor as a top priority for Government and Government
spending on social assistance
UKR
.3
Social assistance spending as % of Budget
BGR
LTU MKD
MTG SRB
LVA
EST
MDA
ROM
.2
ALB
TUR
SWE BLR ARM
BIH
GBR
AZE
FRAKAZ HUN
.1
ITA KSV
CZE SVN
TJK
POL
KGZ
0
.1 .2 .3 .4 .5 .6
Assisting the poor should be the one of the two priorities of the Gvt
Source: LITS II, WB ECA social protection database
There is thus significant heterogeneity across countries in Europe in the levels and changes in
inequality aversion, as well in support for various redistributive policies and the alignment
between average beliefs and actual policies. In the sections that follow, we analyze inequality
aversion and redistributive preferences at the individual level in the pooled sample, with country
fixed effects.
4. Results: Determinants of individual attitudes toward income inequality and
redistributive preferences
Support for reducing inequality
We first analyze the baseline multivariate profile of individual support for reducing inequality
along key socio-demographic characteristics for the three groups of countries and the pooled
sample (Table 4). In all models the estimates are derived from the within country variation in
individual characteristics. The dependent variable in panel I (columns (1) to (4)) is a 5-step
measure of the preference for a smaller gap between the rich and the poor, ranging from 1 –
strongly disagree to 5 – strongly agree. Several results can be noted. First, preference for a
smaller gap between the rich and the poor tends to get stronger with age. The preference for
reducing inequality is also significantly stronger among women in non-EU transition economies.
15
Table 4: Individual preferences for reducing inequality (baseline estimates)
(1) (2) (3) (4) (5) (6) (7) (8)
I. Gap between rich and poor should be reduced II. Inequality aversion (1-10 scale)
Pooled Western E. New EU Non-EU Pooled Western E. New EU Non-EU
18-24 -0.076* -0.037 -0.160* -0.045 -0.059 -0.056 0.018 -0.075
(0.043) (0.130) (0.087) (0.053) (0.043) (0.119) (0.074) (0.055)
25-34 -0.067** -0.075 -0.070 -0.067 -0.023 0.081 -0.027 -0.021
(0.034) (0.101) (0.062) (0.044) (0.033) (0.084) (0.062) (0.043)
35-44 – reference age category
45-54 0.117*** 0.142 0.108* 0.120*** 0.111*** 0.095 0.082 0.128***
(0.034) (0.088) (0.064) (0.045) (0.034) (0.085) (0.061) (0.046)
55-64 0.143*** 0.070 0.153** 0.171*** 0.034 0.147 0.038 0.002
(0.041) (0.098) (0.075) (0.057) (0.039) (0.092) (0.072) (0.055)
65+ 0.018 -0.297*** 0.067 0.086 -0.027 -0.164 -0.068 0.055
(0.049) (0.113) (0.088) (0.071) (0.047) (0.116) (0.084) (0.066)
Male -0.082*** 0.015 -0.068* -0.113*** -0.027 -0.072 -0.036 -0.014
(0.022) (0.051) (0.041) (0.030) (0.023) (0.053) (0.041) (0.031)
Primary or less -0.138*** -0.150 -0.057 -0.199*** 0.084* -0.024 0.086 0.088
(0.045) (0.096) (0.072) (0.068) (0.043) (0.090) (0.069) (0.065)
Secondary – reference category
Post-secondary -0.109*** -0.169** -0.155*** -0.069* -0.210*** -0.211*** -0.315*** -0.162***
(0.027) (0.069) (0.048) (0.038) (0.027) (0.062) (0.048) (0.037)
Employed 0.080*** 0.052 0.099* 0.080** -0.014 0.002 -0.023 -0.020
(0.029) (0.076) (0.053) (0.039) (0.028) (0.074) (0.051) (0.038)
Married 0.000 0.004 -0.035 0.032 -0.038 -0.109** 0.062 -0.062*
(0.025) (0.065) (0.045) (0.034) (0.023) (0.053) (0.045) (0.032)
No religion 0.009 0.286*** -0.136* -0.171* 0.024 0.163** -0.034 -0.097
(0.046) (0.078) (0.071) (0.097) (0.040) (0.074) (0.065) (0.100)
Family with no children -0.066** -0.083 -0.078 -0.047 -0.011 -0.196*** -0.075 0.052
(0.028) (0.071) (0.052) (0.037) (0.028) (0.071) (0.052) (0.037)
Rural 0.023 0.099 0.009 0.029 0.094* -0.131 0.153* 0.108
(0.048) (0.097) (0.086) (0.071) (0.051) (0.097) (0.087) (0.073)
Asset index -0.038*** -0.068*** -0.020 -0.035** -0.113*** -0.107*** -0.170*** -0.088***
(0.011) (0.019) (0.022) (0.015) (0.011) (0.022) (0.020) (0.015)
Household (HH) has a business 0.006 -0.164** -0.024 0.081* -0.251*** -0.220*** -0.368*** -0.186***
(0.034) (0.074) (0.061) (0.049) (0.035) (0.072) (0.062) (0.052)
Primary HH income from self-employment -0.175*** -0.174* -0.198** -0.172*** -0.101** -0.172 -0.162* -0.069
(0.045) (0.097) (0.088) (0.057) (0.044) (0.112) (0.086) (0.052)
Primary HH income from pensions 0.142*** 0.386*** 0.141** 0.082* 0.052 0.151* -0.018 0.056
(0.037) (0.094) (0.066) (0.049) (0.035) (0.090) (0.062) (0.048)
Pseudo R-squared 0.023 0.022 0.024 0.021 0.028 0.022 0.042 0.023
Observations 35355 5454 10455 19446 35407 5467 10511 19429
Notes: Estimates from ordered logistic regressions reported. Robust standard errors, clustered at PSU level in parentheses. Dependent variable in panel I. is a 5-step measure of the preference for a smaller gap between the rich and the
poor, ranging from 1 – strongly disagree to 5 – strongly agree. Dependent variable in panel II is a 1-10 scale measure where 1 corresponds to the belief that larger income differences incentivize effort and 10 corresponds to the belief that
incomes should be made more equal. Country dummies included in all models, but not reported. Significance: * 0.10; ** 0.05; *** 0.01.
16
The relationship between education and preference for equality is not monotonic – relative to the
secondary education baseline the preference for a smaller gap between the rich and the poor is
weaker among those with primary education or less (in non EU member states) and is especially
weak among those with post-secondary education (in all three subsample and the pooled
sample). Finally, respondents who are employed are more likely to support a smaller gap
between the rich and the poor, while those with no religious affiliation are more likely in
Western Europe and less likely, in transition economies (both inside and outside of the EU) to
support a smaller gap between the rich and the poor. With this exception, in terms of key
individual characteristics the patterns presented in table 1 are broadly stable across groups of
countries despite the great diversity of the region.
In terms of the key characteristics of the household in which the respondent resides, support for
reducing the gap between the rich and the poor does not differ significantly between urban and
rural areas. An important correlate of redistributive preferences is the household’s livelihood
source. Respondents from households where the main source of income is pensions appear to
have stronger redistributive preferences in all groups of countries, while reliance on income from
self-employment is negatively associated with a preference for a smaller gap between the rich
and the poor is both in the pooled sample and in the regional sub-samples. Similarly to relying on
income from self-employment, residing in a household that has a business is negatively
associated with a preference for greater equality in Western European countries, but not among
transition countries.
One would generally expect poorer households to be more in favor of redistribution, given that
they would be direct beneficiaries of it. This is confirmed in the pooled model, and in sub-
regional groups with the exception of the new EU member states. Overall, the lower preference
for reducing inequality among wealthier households, business owners, those with high education
level and those with a smaller household size suggest that self-interest is an important driver of
redistributive preferences, something we will further explore below, when we turn to support for
specific groups.
We also consider an alternative measure of inequality aversion (Panel II, columns 5-8). This
alternative measure does not invoke the poor and contrasts greater equality of incomes against
the individual effort incentives of greater income differences. It is based on a 10-step scale with
equally spaced intervals, which may be easier to interpret.
Estimates in columns (6)-(8) of Table 3 suggest similar patterns to those described above. In
particular, the regressions confirm the negative association between high levels of education, the
household’s wealth, as well as reliance on income from self-employment (or having a household
business) on the one hand and preference for reducing income inequality on the other. Some
other results are, however, less robust to the choice of the inequality aversion measure. For
instance, there is no longer a positive relationship with age or being employed and a preference
for smaller income differences.
17
Beliefs, expectations and support for reducing inequality
Table 5 presents estimates of extended models 12, in which a number of variables capturing beliefs
about fairness, past and expected mobility, the impact of the financial crisis, as well as attitudes
toward markets and risk, are added to the baseline models from table 4.
Focusing first on the estimates in columns (1) to (4) where the dependent variable is based on a
5-step measure of the preference for a smaller gap between the rich and the poor, the regressions
confirm the importance of beliefs about institutional fairness in redistributive preferences. In the
pooled sample the perception of injustice as the main determinant of need in society (relative to
the baseline belief that need is an inevitable result of modern life) is positively associated with
support for a smaller gap between the rich and the poor, while the opposite is the case when need
is perceived to be the result of laziness. Similarly, redistributive preferences are stronger among
those who perceive that success in society is driven by political connections or breaking the law
(relative to effort and hard work). There are also differences across regions, namely, the
influence of beliefs about institutional fairness appears to be strong in countries of Western
Europe and to a smaller degree in new EU member states but not in other transition countries. In
non-EU transition economies beliefs about the main determinants of need in society are not
significantly associated with preferences for reducing the gap between the rich and the poor.
However, the belief that success is mostly determined by political connections (relative to effort
and hard work) is associated with a higher preference for redistribution, although to a lesser
extent than in EU member states.
A higher (subjective) current position on the society’s social ladder is negatively associated with
the preference for a smaller gap between the rich and the poor in Western European countries
and in new EU member states, but not in the non-EU transition economies. Once subjective
relative income is included in the regression, the coefficient on our objective measure of
household welfare (the asset index) becomes insignificant for all country groups, suggesting that
individual perceptions of one’s position in the income distribution are what matters for forming
preferences over redistribution. The negative association is expected, as those who place
themselves at the bottom of the country’s welfare ladder today would benefit from redistribution,
and would therefore be expected to have a stronger preference for smaller gap between them and
the rich. It is also the case in Western Europe and new EU member states that conditional on
current placement on the welfare ladder, a higher placement 4 years ago is associated with a
stronger redistributive preference. In other words, those who experienced greater upward
mobility (or less downward mobility) during the past 4 years are less in favor of redistribution.
Again, current subjective relative income, and perceived past mobility are not statistically
significantly associated with a greater support for reducing the gap between the rich and the poor
in the group of non-EU member states.
12
The loss of sample size compared to Table 3 is due to primarily to missing values for the 3 ladder questions. The
results on other belief variables in Table 4 carry through is the models are re-estimated over the full sample.
18
Table 5: Individual preferences for reducing inequality – extended models
(1) (2) (3) (4) (5) (6) (7) (8)
I. Gap between rich and poor should be reduced II. Inequality aversion (1-10 scale)
Pooled Western E. New EU Non-EU Pooled Western E. New EU Non-EU
Main determinant of success in society (effort and hard work is baseline)
Intelligence and skills -0.064* 0.038 -0.142** -0.066 -0.114*** -0.013 -0.148** -0.125**
(0.035) (0.067) (0.061) (0.054) (0.036) (0.060) (0.061) (0.058)
Political connections 0.202*** 0.439*** 0.176** 0.143** 0.059 0.270** 0.011 0.050
(0.050) (0.144) (0.079) (0.071) (0.049) (0.135) (0.076) (0.069)
Breaking the law 0.234*** 0.699*** 0.262*** 0.113 0.051 0.219 0.001 0.060
(0.065) (0.228) (0.099) (0.091) (0.063) (0.296) (0.105) (0.081)
Other 0.130* 0.438*** -0.000 0.128 0.180*** 0.405** 0.292** 0.030
(0.068) (0.132) (0.119) (0.095) (0.067) (0.161) (0.117) (0.095)
Main determinant of need in society (inevitable part of modern life is baseline)
Unlucky -0.050 -0.011 -0.083 -0.071 0.162*** 0.077 0.306*** 0.087
(0.049) (0.104) (0.084) (0.077) (0.051) (0.110) (0.077) (0.084)
Laziness -0.092** -0.284*** -0.070 -0.067 -0.073* -0.242*** 0.026 -0.084
(0.043) (0.078) (0.075) (0.070) (0.044) (0.089) (0.075) (0.070)
Injustice 0.250*** 0.508*** 0.314*** 0.092 0.245*** 0.441*** 0.364*** 0.109*
(0.041) (0.087) (0.068) (0.063) (0.041) (0.096) (0.064) (0.064)
Other -0.038 -0.123 0.077 -0.097 -0.138** -0.163 -0.051 -0.200**
(0.067) (0.114) (0.121) (0.103) (0.061) (0.136) (0.102) (0.092)
Ladder position 4 years ago 0.017 0.067*** 0.042* -0.013 -0.006 0.027 0.000 -0.018
(0.012) (0.025) (0.022) (0.017) (0.012) (0.023) (0.022) (0.016)
Ladder position now -0.066*** -0.089** -0.102*** -0.028 -0.025 -0.045 -0.040 -0.006
(0.016) (0.039) (0.031) (0.022) (0.016) (0.034) (0.029) (0.022)
Expected ladder position 4 years hence -0.027** -0.064** -0.051** -0.011 -0.061*** -0.108*** -0.071*** -0.049***
(0.012) (0.030) (0.025) (0.016) (0.013) (0.027) (0.021) (0.018)
Not affected by the financial crisis -0.170*** -0.164** -0.173** -0.166*** -0.021 -0.014 -0.103 0.012
(0.035) (0.070) (0.068) (0.049) (0.038) (0.071) (0.067) (0.055)
Expressed risk preference ("would take the risk" is baseline)
Would not take the risk 0.057* -0.032 0.041 0.090* -0.091** 0.088 -0.002 -0.188***
(0.034) (0.072) (0.057) (0.051) (0.036) (0.070) (0.057) (0.055)
Could not answer -0.028 0.159 -0.127 0.040 0.132** 0.487*** 0.193** 0.048
(0.054) (0.214) (0.096) (0.067) (0.057) (0.165) (0.097) (0.070)
Market economy preferred -0.135*** -0.366*** -0.210*** -0.000 -0.107*** -0.268*** -0.203*** 0.009
(0.033) (0.073) (0.056) (0.048) (0.034) (0.072) (0.055) (0.050)
Asset index -0.015 -0.047** 0.012 -0.020 -0.094*** -0.094*** -0.146*** -0.070***
(0.012) (0.022) (0.024) (0.017) (0.012) (0.025) (0.022) (0.016)
Individual / HH controls Yes Yes Yes Yes Yes Yes Yes Yes
Pseudo R-squared 0.033 0.051 0.038 0.027 0.035 0.036 0.053 0.027
Observations 27687 5020 8529 14138 27705 5023 8558 14124
Notes: Estimates from ordered logistic regressions reported. Robust standard errors, clustered at CEA level in parentheses. Dependent variable in panel I. is a 5-step measure of the preference for a smaller gap between the rich and the
poor, ranging from 1 – strongly disagree to 5 – strongly agree. Dependent variable in panel II is a 1-10 scale measure where 1 corresponds to the belief that larger income differences incentivize effort and 10 corresponds to the belief that
incomes should be made more equal. All individual and household characteristics from the baseline model, as well as country dummies included in all models, but not reported. Significance: * 0.10; ** 0.05; *** 0.01.
19
The expected ladder position 4 years into the future is negatively correlated with the preference
for redistribution, conditional on the current placement on the ladder in the pooled sample and in
the subsamples of Western European countries and new EU states. This negative association is
consistent with the framework in Benabou’s and Ok (2001) where redistributive preferences are
shaped not only by one’s current income position, but also by expectations of the evolution of
one’s income position in the future. 13 The relationship between expected future position on the
social welfare ladder and current redistributive preference is also negative for the group of non-
EU transition economies, although it is not statistically significant. As discussed in Cojocaru
(2014b), the lack of dynamic considerations in the group of non-EU transition economies may be
due to the fact that the greater political and economic uncertainty outside of the EU makes it
more difficult to link current preferences with expectations of the future, or to believe in
medium-term policy stability, which would be required for expectations of the future to influence
policy preferences today.
Political preferences, in particular, the belief that the market economy is always preferable to any
other form of economic system is similarly negatively associated with a preference for a smaller
gap between the rich and the poor in the pooled sample and in EU countries (both in Western
Europe and in new EU members). This preference is likely due to the fact that those who value
the efficiency of market allocation may not be as strongly concerned with the equity aspects of
the market mechanism, whereas a preference for greater state involvement in the economy is
oftentimes driven by concerns about market failures, and especially about their impact on the
poor. Again, market preference does not appear to explain the variation in redistributive
preferences in the group of non-EU transition economies.
Finally, perceived experience of the recent financial and economic crisis is associated with
stronger redistributive preferences in all country groups. Across the board those who report not
to have been affected at all by the financial crisis are less likely to prefer a smaller gap between
the rich and the poor.
Not all of the above findings are robust to the choice of the variable used to elicit redistributive
preferences. Estimates in the second panel of table 4 suggest that beliefs about fairness, such as
the attribution of need to injustice (laziness), are still associated with a greater (smaller)
preference for equality of incomes. Similarly, preference for the market economy and the
expectations of future social mobility remain strong predictors of tolerance for inequality in both
specifications. At the same time, attribution of need to bad luck is now also associated with a
greater preference for equality, whereas this was not observed with the poor-rich gap measure.
Likewise, the current position on the country’s welfare ladder, as well as the impact of the
financial crisis were strong predictors of the preference for the size of the gap between the rich
and the poor, but are insignificant in the alternative specification. Overall, it is still the case,
13
For a more formal test of the POUM hypothesis, which considers explicitly the exact current and future positions
of the individuals, and how these intersect with the individual’s degree of risk aversion, see Cojocaru (2014b).
20
however, that political preferences, beliefs about institutional fairness, as well as (perceived)
own past and future mobility, are significantly associated with redistributive preferences in
Western European countries and in the new EU member states, but less so in non-EU transition
economies.
Table 6: Assisting the poor should be among the top 2 priorities for extra government spending
Pooled Western New EU Non-EU
Europe states
Main determinant of success in society (Effort and hard work
– baseline)
Intelligence and skills -0.107** 0.140* -0.163** -0.191***
(0.042) (0.083) (0.074) (0.062)
Political connections 0.067 0.011 -0.031 0.105
(0.053) (0.149) (0.087) (0.073)
Breaking the law -0.034 0.176 0.000 -0.100
(0.068) (0.230) (0.107) (0.094)
Other 0.055 -0.180 0.151 0.035
(0.072) (0.191) (0.120) (0.102)
Main determinant of need in society (Inevitable part of
modern life – baseline)
Unlucky 0.239*** 0.282** 0.217* 0.222**
(0.065) (0.125) (0.111) (0.098)
Laziness -0.149*** -0.140 -0.109 -0.173**
(0.055) (0.123) (0.097) (0.078)
Injustice 0.236*** 0.379*** 0.215** 0.187***
(0.047) (0.107) (0.085) (0.067)
Other -0.033 -0.034 -0.173 0.009
(0.075) (0.158) (0.133) (0.107)
Ladder position 4 years ago 0.013 0.017 0.042* -0.006
(0.013) (0.027) (0.022) (0.018)
Ladder position now -0.050*** -0.092** -0.046 -0.027
(0.017) (0.039) (0.033) (0.023)
Expected ladder position 4 years hence -0.004 -0.008 -0.027 0.001
(0.013) (0.031) (0.022) (0.017)
Not affected by the financial crisis -0.031 -0.053 -0.052 -0.027
(0.040) (0.079) (0.093) (0.052)
Expressed risk preference (Would take the risk – baseline)
Would not take the risk -0.067* -0.016 -0.055 -0.077
(0.039) (0.088) (0.064) (0.057)
Could not answer -0.048 0.045 -0.078 -0.038
(0.059) (0.216) (0.093) (0.077)
Market economy preferred in all circumstances -0.159*** -0.231*** -0.124* -0.143***
(0.039) (0.084) (0.070) (0.054)
Asset index -0.109*** -0.088*** -0.145*** -0.110***
(0.012) (0.021) (0.023) (0.018)
Individual and HH characteristics Yes Yes Yes Yes
Pseudo R-squared 0.067 0.041 0.072 0.060
Obs 28489 5048 8761 14680
Notes: Estimates from logistic regressions reported. Robust standard errors, clustered at CEA level in parentheses.
Dependent variable 1 if the respondent believes that extra government spending to assist the poor is among top 2
government priorities, and zero otherwise. All individual and household characteristics from the baseline model, as well
as country dummies are included in all models, but not reported. Significance: * 0.10; ** 0.05; *** 0.01.
21
Finally, recall that the models in tables 4 and 5 explored how beliefs about fairness as well as
political preferences and social mobility experience (and expectations) affect the preference for
reducing the gap between the rich and the poor. One prominent possibility for bridging that gap
would be for the government to spend more of its resources on the poor. This is investigated in
table 6, which estimates that same models as those in table 5, except that the dependent variable
is an indicator that evaluates to 1 if the respondent believes that assisting the poor should be
among the top two priorities for extra government spending and zero otherwise.
Given the emphasis on the poor, the most relevant beliefs about institutional fairness are those
with regard to the main determinant of need. Here the preferences are largely consistent – the
belief that need is due to injustice is associated both with a preference for reducing the gap
between the rich and the poor and with a preference for extra government spending on the poor.
Likewise, if need is perceived as a product of laziness, this reduces both the preference for extra
spending on the poor and for reducing the gap between them and the rich.
In terms of the determinants of success, while those who attribute it to intelligence and skills are
less in favor of both a smaller gap between the rich and the poor, and extra government spending
on the poor, perceptions of nepotism/corruption are not significantly associated with a preference
for assisting the poor as a top government spending priority in the same way as they were in the
case of inequality tolerance, which could be due to nepotism or corruption being more associated
with the incomes of those at the top end of the distribution, and, as such, less relevant for policies
directed at the bottom end.
Individual preferences for redistribution to specific groups
Lastly, we present multinomial logistic regressions where the dependent variable is the group
that, according to the respondent, deserves most government support – the disabled, the elderly,
war veterans, families with children, the working poor, the unemployed or other groups (Table
7). Again, self-interest appears to be a key determinant of support for redistributive policies:
support for the elderly increases with age. Likewise, support for families with children increases
with household size. Beliefs appear as a significant driver of support for redistribution towards
the working poor and the unemployed: those who believe that the main determinant of need in
society is injustice are about 20% more likely to think that the working poor or the unemployed
are most deserving of government support. Similarly, those who believe that success comes
mostly from hard work or intelligence and skills are less likely to support these two groups.
22
Table 7: Preference for redistribution to specific groups
Elderly War Families Working Unemployed Other
veterans with poor
children
Main determinant of success in society is self: (hard -0.011 -0.102 -0.092 -0.217*** -0.244*** -0.577***
work and effort, or intelligence and skills) (0.050) (0.082) (0.048) (0.060) (0.063) (0.111)
Main determinant of need in society is injustice -0.018 -0.047 0.07 0.248*** 0.275*** -0.224*
(0.044) (0.077) (0.043) (0.056) (0.055) (0.104)
Past ladder 0.01 -0.013 0.01 0.021 0.053** 0.022
(0.016) (0.027) (0.015) (0.020) (0.018) (0.032)
Current ladder -0.046* -0.008 -0.043 -0.058* -0.049 0.067
(0.023) (0.036) (0.022) (0.027) (0.026) (0.042)
Future ladder -0.005 0.056* 0.005 -0.015 -0.014 -0.042
(0.017) (0.025) (0.016) (0.020) (0.018) (0.030)
Not affected by the financial crisis -0.08 -0.054 -0.100* -0.142* -0.226*** 0.024
(0.049) (0.079) (0.049) (0.062) (0.062) (0.116)
Market economy always preferred -0.109* 0.015 -0.043 -0.129* -0.056 -0.026
(0.045) (0.077) (0.045) (0.056) (0.057) (0.102)
Age (baseline 35-44)
18-24 -0.095 0.219 0.133 0.151 0.144 -0.019
(0.079) (0.119) (0.069) (0.087) (0.084) (0.144)
25-34 -0.036 0.005 0.103 0.038 0.151* -0.029
(0.062) (0.102) (0.056) (0.072) (0.067) (0.112)
45-54 0.238*** 0.096 -0.049 0.155* 0.150* -0.017
(0.063) (0.109) (0.058) (0.073) (0.070) (0.117)
55-64 0.418*** 0.016 0.008 -0.076 -0.039 -0.033
(0.068) (0.122) (0.066) (0.086) (0.080) (0.131)
65+ 0.633*** 0.405** -0.139 -0.164 -0.247* -0.041
(0.080) (0.133) (0.081) (0.104) (0.100) (0.161)
Male -0.031 0.146* -0.102** -0.001 0.104* 0.147*
(0.037) (0.069) (0.038) (0.047) (0.044) (0.068)
Education (baseline: secondary)
Primary or less 0.252*** 0.08 -0.228** -0.048 -0.037 0.197
(0.063) (0.114) (0.071) (0.081) (0.074) (0.141)
Post-secondary 0.103* 0.146 0.051 -0.035 0.084 0.059
(0.046) (0.080) (0.046) (0.057) (0.053) (0.105)
Employed 0.062 -0.188* 0.091* 0.240*** -0.114* -0.01
(0.047) (0.085) (0.046) (0.060) (0.055) (0.106)
Married -0.078 -0.064 0.054 -0.051 -0.093* -0.074
(0.040) (0.069) (0.041) (0.052) (0.047) (0.084)
No-religion 0.033 -0.085 -0.031 0.152 0.02 0.188
(0.069) (0.147) (0.067) (0.081) (0.099) (0.105)
Family with no children 0.130** 0.038 -0.406*** 0.044 0.115* 0.1
(0.049) (0.074) (0.045) (0.055) (0.054) (0.097)
Rural -0.048 -0.025 0.014 -0.033 0.102 -0.148
(0.058) (0.093) (0.061) (0.069) (0.076) (0.125)
Asset index -0.048*** 0.003 -0.031* -0.101*** -0.107*** -0.039
(0.014) (0.025) (0.015) (0.019) (0.018) (0.027)
Family has a business 0.036 0.198* 0.018 0.012 0.02 0.233*
(0.056) (0.097) (0.054) (0.069) (0.066) (0.096)
Primary HH income from self-employment -0.061 -0.113 -0.048 -0.069 -0.007 -0.003
(0.068) (0.101) (0.065) (0.079) (0.072) (0.147)
Primary HH income from pensions 0.017 -0.079 -0.012 -0.261*** -0.035 -0.161
(0.055) (0.096) (0.057) (0.072) (0.068) (0.124)
Constant -0.24 -3.085*** -0.252 -0.508* 0.05 -1.789***
(0.177) (0.357) (0.303) (0.235) (0.241) (0.365)
Pseudo R squared 0.093
Observations 30250
Notes: Estimates from multinomial logit regressions reported. Robust standard errors, clustered at CEA level in parentheses. Dependent variable:
reference category – disabled. Country dummies are included in all models, but not reported. Significance: * 0.10; ** 0.05; *** 0.01.
Those who are currently not employed are only marginally statistically significantly more likely
to support redistribution towards the unemployed as the most deserving group. But recent
experience of income shocks plays a significant role in support: those who say they were
23
affected by the financial crisis are about 20 percent more likely to say that the unemployed are
the group that deserves most government support (relative to the disabled). Recent experience
with the crisis is also significantly associated to supporting redistribution to the working poor,
albeit to a lesser extent. Those who place themselves higher on their countries’ income scale are
significantly more likely to elect the disabled as the category most deserving of government
support. Finally, ideology (preference for a planned economy rather than the market economy)
is only significantly associated with support for the elderly as the most deserving group for
government support.
5. Conclusion
There is widespread support in Europe and Central Asia for reducing the existing gap between
the rich and the poor. This preference is strongest in the Western Balkans, but it is stronger still
in the Western European countries included in the LiTS II sample.
Aversion for inequality and preferences for redistribution are not static: fewer people want to
reduce the gap between the rich and the poor in 2010 than in 2006. Although there is some
correlation between the perception of recent income shocks and attitudes to inequality and
redistribution, the increased tolerance for inequality cannot be fully accounted for by the
economic contraction during the crisis. Also, while perceptions of the fairness of the income-
generation process also improved somewhat during the period, these improvements appear to be
unrelated to the cross-country dynamics of tolerance for inequality in ECA.
Overall, political preferences, beliefs about institutional fairness, as well as (perceived) own
personal past and future mobility, are significantly associated with redistributive preferences in
Western European countries and in the new EU member states, but less so in non-EU transition
economies.
Generally, there is a high degree of agreement that the disabled and the elderly deserve support
from government. At the same time, there is a high level of heterogeneity across countries in
average beliefs on which group(s) deserve most support from the government. Average support
for reducing inequality or for redistribution benefiting certain groups is correlated (but not
always) with actual redistributive policies at the country level.
At the individual level, different motives are likely to explain different redistributive preferences.
Self-interest (i.e. expectation that one may directly benefit from the policy) appears to be an
important motivation for support for the elderly and families with children. By contrast, values
and beliefs (such as expectations about one’s future mobility, beliefs about the fairness of the
income-generating process) are important drivers of support for the working poor and the
unemployed.
While differences between responses to various measures of redistributive preferences indicate
the importance of framing, our results are quite consistent. The effect of beliefs about fairness,
24
and of political preferences, is found to be for the most part robust to the choice of the framing of
question that elicits the respondent’s tolerance for inequality, and also consistent with
preferences over policy priorities for extra government spending.
25
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27
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