Working Paper: NBER ID: w8524
Authors: Alberto Alesina; Edward Glaeser; Bruce Sacerdote
Abstract: European countries are much more generous to the poor relative to the US level of generosity. Economic models suggest that redistribution is a function of the variance and skewness of the pre-tax income distribution, the volatility of income (perhaps because of trade shocks), the social costs of taxation and the expected income mobility of the median voter. None of these factors appear to explain the differences between the US and Europe. Instead, the differences appear to be the result of racial heterogeneity in the US and American political institutions. Racial animosity in the US makes redistribution to the poor, who are disproportionately black, unappealing to many voters. American political institutions limited the growth of a socialist party, and more generally limited the political power of the poor.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Racial animosity (J15) | Reduced support for income redistribution (H23) |
| Lack of a socialist party (P39) | Limited political power for the poor (D72) |
| Federal structure of the US (H77) | Limited political power for the poor (D72) |
| Historical context of US political institutions (P16) | Limited centralized redistributive policies (H19) |
| Historical developments (B15) | Level of redistribution (D39) |