Working Paper: CEPR ID: DP6051
Authors: Giuseppe Bertola; Winfried Koeniger
Abstract: We show theoretically that income redistribution benefits borrowing-constrained individuals more than is implied by standard relative-income and uninsurable-risk considerations. Empirically, we find in international opinion-survey data that younger and lower-income individuals express stronger support for government redistribution in countries where consumer credit is less easily available. This evidence supports our theoretical perspective if such individuals are more strongly affected by tighter credit supply, in that expectations of higher incomes in the future increase their propensity to borrow.
Keywords: borrowing constraints; consumer credit
JEL Codes: D23; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Income Shocks (G59) | Adverse Effect on Borrowing-Constrained Individuals (G51) |
| Income Redistribution (H23) | Benefits for Borrowing-Constrained Individuals (G51) |
| Borrowing Constraints (G51) | Impact of Income Redistribution (F61) |
| Credit Constraints (E51) | Support for Redistribution (D39) |
| Younger Individuals (L26) | Preference for Government Redistribution (H19) |
| Lower-Income Individuals (I32) | Support for Redistribution (D39) |
| Limited Consumer Credit (D19) | Favorability towards Redistribution among Poorer Individuals (D63) |