Economists know that redistributive policies rely on the prevailing beliefs about the fairness of social competition. If a society believes that socioeconomic success only depends on merit, and that everyone should fully enjoy the fruits of her work, it will demand low redistribution. If, instead, the belief prevails that wealth is mostly determined by “luck”, such as the fortune of being born in the right place into the right family, society will support higher redistribution thus levying heavier taxes.
But what happens when a person believing in the role of merit suddenly and unpredictably experiences bad luck? Standard economic reasoning suggests she may adjust the expectations on what determines success thereby raising her support for redistribution. This mechanism has been described in theoretical models but was never tested empirically so far.
Our research answers this question by exploring evidence from an unfortunate natural experiment, the earthquake that struck central Italy in 2009. The earthquake consisted of a first strong shake on April 6 and dozens of aftershocks lasting until April 13, seven of which were as destructive as the first one.
To study how the exposure to the shakes affected inhabitants’ preferences about redistribution, the authors match information on the peak ground acceleration (PGA) of each shock recorded by the Italian National Strong Motion Network throughout the L’Aquila earthquake with nationally representative survey data about individual opinions and beliefs that were collected 18 months after the shock. This allows reconstructing the acceleration experienced by each survey respondent during each shake.
PGA is the largest peak acceleration recorded at a given geographic point during a seismic event. Unlike the Richter and moment magnitude scales, it is not a measure of the total energy of the earthquake, but rather of how hard the earth shakes on the surface. It thus provides an objective indicator of the intensity with which residents perceive the shakes.
The empirical analysis shows that the average intensity of the shakes registered throughout the L’Aquila earthquake is associated with subsequent stronger beliefs that, for a society to be fair, income inequalities should be levelled by redistribution. The analysis of the single shocks occurred between April 6 and 13, however, reveals that the relationship between redistributive preferences and the intensity of the shakes is triggered only after a certain number of shocks. It is with the sixth shock that the ground acceleration experienced by inhabitants becomes a statistically significant predictor of support for redistribution.
The peak ground acceleration of the three final shocks occurred between April 9 and 13 very well predicts preferences for redistribution, as if some sort of cumulative effect of the shocks has been at stake. Though new in the economics literature, this result recalls psychological theories explaining the different behavioural outcomes of single versus multiple shocks as resulting from a dose-response relationship. To corroborate this result, the authors compare the outcomes of the L’Aquila earthquake with a single-shake earthquake occurred in the province of Parma three months before, finding that the latter had no effect on individuals’ social preferences.
To get an idea of the size of the effect, consider that a 10 centimetres per square second increase in the peak ground acceleration – which is capable of making objects strongly vibrate on the surface – causes an increase in the likelihood of supporting redistribution of 3 percentage points. This may look like a modest effect, but its size is in absolute value comparable to that of education and approximately three times bigger than that of political orientation – which is commonly considered as one of the most important predictors of individuals’ redistributive preferences, with right-wing people generally wanting less redistribution.
Understanding the drivers of redistributive preferences is important because the proportion of people supporting redistribution in turn is a good predictor of the share of GDP spent on social welfare both across countries. This study calls for further investigation also in light of the recent, cross-national, rise in populist movements calling for more redistribution, as the authors’ findings support the theory that demand for redistribution is strongly driven not only by selfish motives (i.e. the hope to personally benefit from public welfare spending) but also by a genuine concern with the fairness of social competition.
- This blog post is based on the authors’ paper Repeated shocks and preferences for redistribution, Munich Personal RePEc Archive (MPRA)
- The post gives the views of its authors, not the position of LSE Business Review or the London School of Economics.
- Featured image by TheWiz83 at it.wikipedia, under a CC BY-SA 3.0 licence
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Giovanni Gualtieri is a senior researcher at the Institute of Biometeorology of the Italian National Research Council. His research interests include wind energy, covering a wide range of issues from wind resource assessment to wind farm layout optimisation, atmospheric pollution, boundary layer meteorology and transportation systems planning.
Marcella Nicolini is associate professor at the department of economics and management of the University of Pavia. Her research interests are in the fields of international economics, industrial organisation, and energy economics. She is currently focussing on the role of culture, norms and institutions in shaping economic behaviour.
Fabio Sabatini is associate professor of economics at the department of economics and law of Sapienza University of Rome. His research deals with the economics of social media, culture, and social norms.
Luca Zamparelli is associate professor of economics at Sapienza University of Rome. His research mainly focuses on macro-dynamic models of growth and distribution, endogenous growth theory, the history of economic thought, and classical political economy.