Coauthor Erzo Luttmer, Dartmouth College
Economists have long noted that preferences for income redistribution vary from country to country. The preference for redistribution, for example, is higher among Europeans than Americans, and individuals in Western countries are less supportive of redistribution than people in former socialist countries.
Determining what influences those preferences is crucial in understanding tax and transfer policy, but it has also proved challenging.
Environmental and institutional factors, such as income inequality or racial heterogeneity, are considered influential. But so is culture — those long-standing customs, beliefs and behaviors characteristic of a group. And when looking at a population within a single country, those two factors are near impossible to disentangle.
So Monica Singhal, associate professor of public policy, looked to immigrants. By looking at people who were born in one country but now lived in another, Singhal and her coauthor Erzo Luttmer, a former Harvard Kennedy School faculty member now at Dartmouth College, hoped to be able to determine whether, and how much, culture could influence the taste for redistribution.
Looking at data from 32 European countries, the authors determined national averages for redistributive preferences and then looked to see how predictive those were of the preferences of immigrants.
Their results were surprising: the effect of culture on an individual’s preference for redistribution was as large as household income and 60 percent as large as the combined effect of income and education.
The researchers also found that culture persisted. Cultural effects on redistribution preference were still strong in immigrants who had lived in their new country of residence for more than 20 years. And those preferences were passed down to a second generation of immigrants, where the effect of culture was still two-thirds as strong as in the parents’ generation.
The results weren’t limited to a subset of particular countries, and the influence of culture was strong regardless of the immigrants’ background, education, or income.
Selection (the fact that immigrants choose to move to another country and are therefore not a random sample) is always a concern when examining immigrants’ preferences, the authors acknowledge. Migrants would move to a country more in line with their own preferences or because they could be better off. But preference-based selection should, if anything, reduce the effects.
Finally, the authors demonstrate that culture affects not only reported preferences but also political behavior: immigrants from countries with high preferences for redistribution are more likely to vote for a pro-redistribution political party in their countries of residence.
Singhal’s interest in the subject dates back to her days as a doctoral student at Harvard, when she noticed that students, despite a variety of backgrounds and a shared interest in a narrow field of study, exhibited preferences that seemed to be influenced by their country of origin.
But beyond confirming an early intuition, the findings have important implications.
“Individual preferences for income redistribution cannot be fully explained by economic self-interest or by economic, political, or social aspects of the current environment, since individual preferences continue to be influenced by country of origin even in a common environment,” the authors write.
“This also suggests that culture may be an important factor in explaining the large observed differences in systems of redistribution across countries. Finally, the inherited cultural values of immigrants can . . . shape the policies of the societies to which they migrate. Thus, while our primary focus is on using immigrants as a mechanism to identify the effects of culture, the results also have implications for the political economy of immigration policy.”
— by Robert O'Neill