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How do Economic Circumstances Determine Preferences? Evidence from Long-run Panel Data

  • Tom O’Grady

Abstract

Preferences for redistribution and social spending are correlated with income and unemployment risk, but it is unclear how these relationships come about. I build a theory emphasizing that only large changes in economic circumstances provide the information and motivation needed for people to change their preferences. Stable long-run preferences are shaped mainly by early socialization, which includes economic and ideological influences from the family, and early labor market experiences. Enduring shocks, low intergenerational mobility and the tendency of left-wing parents to be poorer generate correlations between circumstances and preferences. Because preferences are stable, greater inequality may not increase aggregate support for redistribution. Support is found for the theory with panel data from Switzerland, using a range of empirical tests.

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Department of Political Science, University College London, United Kingdom (Email: tom.d.ogrady@gmail.com). I wish to thank the editor, three anonymous reviewers, Ben Ansell, Adam Berinsky, Charlotte Cavaille, Tom Cusack, Jeremy Ferwerda, Jens Hainmueller, Torben Iversen, Dan de Kadt, Dean Knox, Stephanie Rickard, David Singer, Kathy Thelen and Teppei Yamamoto for useful suggestions and comments. This study uses data collected by the Swiss Household Panel (SHP), which is based at the Swiss Centre of Expertise in the Social Sciences (FORS). The SHP is financed by the Swiss National Science Foundation. The data are available for free download from FORS with a data use contract, which can be obtained at http://forscenter.ch/en/our-surveys/swiss-household-panel. Data replication sets are available in Harvard Dataverse at: https://dx.doi.org/10.7910/DVN/IEX6BE and online appendices at: https://doi.org/10.1017/S0007123417000242.

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How do Economic Circumstances Determine Preferences? Evidence from Long-run Panel Data

  • Tom O’Grady

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