Insurance or Redistribution Motives? Behaviors and Beliefs in the Welfare State

Key controversies in the debate over social insurance and redistribution revolve around the issue of the income elasticity of the demand for social insurance and redistribution. Why doesn't the welfare state become obsolete when national income rises? Why is there a negative rather than a positive association between pre-transfer income inequality and the generosity of the welfare state? This paper provides micro evidence on the relationship between voters' demand for public transfers and their income, using subsequent voter surveys from Norway and the US. First, we replicate a well known significantly negative correlation between income and support for public transfers in the cross section. Next we show that this negative correlation turns significantly positive once we control for the individual's relative position in the income distribution. Thus, demand for public transfers is driven by insurance motives rather than redistribution motives.