What makes us more (or less) inclined to redistribute resources? Drawing on findings from a recent study, Joan Costa-Font and Frank Cowell write that European integration has a role in lessening national pride and is conducive to a more positive attitude toward income redistribution. They argue that when individuals identify themselves with a ‘broader other’, they are more willing to redistribute resources.
What shapes preferences toward the redistribution of resources? Economists, such as Allan Meltzer and Scott Richard, have traditionally linked preferences for redistribution to the position an individual locates in the overall distribution of income within a society, but this principle has not been consistently validated. One alternative explanation, that we put forward, lies in the role of identity in shaping people’s attitudes toward solidarity.
According to George Akerlof and Rachel Kranton, social identities shape individuals’ preferences by defining a “sense of belonging”. Identities are able to contribute to the development of cognitive biases if a person’s reference group is not the whole population but that of his group, or his country. People in relatively rich countries may perceive themselves as being poorer than they really are, not so much because of flawed information, but because their reference point is based on the social group they identify with, and not necessarily the whole population.
In principle, European identity could play a role similar to that of American identity, uniting people by transcending borders, and especially racial divisions. A superordinate identity eliminates the effects of parochialism, nationalism and group identity. In this sense, the “European project” certainly raises interesting questions in connection with the mechanisms of redistribution and perceptions of identity.
In the absence of a natural experiment to test the influence of identity on redistribution preferences, potential alternatives include drawing on Europeanisation processes, educational reforms and external sources of national pride such as the success of national teams in sporting contests. The substitution of a national currency by a common currency (the euro) may have triggered some salience for the European project, resulting in greater weight for the European component of people’s identity. Similarly, changes in citizenship education and even factors like the medals achieved by a country in the Olympic Games could play a role.
In a recent study we argue that the development of a European identity resulting from institutional reforms such as the introduction of a common currency provides some quasi-experimental evidence to examine this issue. Indeed, Europe is the ideal setting to study changes in identity, given that the integration process can influence existing welfare institutions and thereby affect people’s redistributive preferences. Using an instrumental-variable strategy that takes advantage of three potential mechanisms affecting an individuals’ identity, we focus on countries that adopted the common currency only after its inception so that we can observe a period before and after being part of the euro.
We contend that when identity is defined by a “broader other”, people are more likely to express a preference for true redistribution, while redistribution in small communities might be partially explained by exchange motivations instead. Becoming part of the Eurozone, in a setting where redistribution is primarily undertaken by national welfare states, should not change the individual’s expectation of benefiting from redistribution, and should primarily affect the rescaling of people’s spatial identity.
Our results provide evidence to support the notion that the development of a European identity appears to weaken national pride, which in turn influences redistributive preferences. We find a positive (negative) impact of European identity (national identity) on preferences for redistribution. The effect of identity is comparable in size to the effect of income and is only exceeded by the effect of tertiary education.
These results indicate that institutional changes involving symbolic features that define one’s identity – in this case the currency – can exert an impact on people’s attachments: more specifically, they can underpin the formation of a person’s identity. Our findings show that there are important positive knock-on effects on redistributive preferences associated with furthering European integration. The lessening of national pride is more likely to lead to changes in individuals’ reference points, which influence the way they form preferences toward redistribution.
This article summarises material in a recent LEQS paper
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Note: This article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.
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Joan Costa-Font – LSE
Joan Costa Font is an Associate Professor (Reader) in Political Economy at LSE. His research is on the economic analysis of welfare institutions, health, health care and aging, with a particular focus on Europe. He is co-editor of the Applied Economics, Perspectives and Policy (AEPP) journal.
Frank Cowell – LSE
Frank Cowell is Professor of Economics at the Department of Economics, London School of Economics and Political Science
Why didn’t you mention the Ryder Cup? The most obvious example you could have mentioned & it’s a British initiative led by what is basically a British body, the R&A. You also fail to mention Military that too draws peoples together to support their armed forces. Countries that respect their military & support their military are united. Sport & Sports events like Music bring peoples together.
What a strange argument.It is about economics, we gather.Then there is talk about redistribution of resources.Now I might be wrong, but it very much appears as if money or resources with economic worth are at stake here.Then there is talk about people’s identity, who do they identify with, one wonders.Then solidarity makes an entrance.When you are talking about the economy and distribution of resources in an economic sense, you are essentially talking money or whatever is bought, sold, hired,etc., in exchange for the medium of exchange or its equivalent in currency or kind as people agree upon or accept as decreed by the state they are in.Economy means production and exchange, by choice or nessecity, not theft by means of conquest, say.
The economy means there is production of goods and services, trading, mining, transport, administration, etc.,etc., all the productive endeavour of a nation-state and entities smaller than that and trading blocks bigger than the nation-state.In any such productive and distributive entity or groups of entities there are pockets of higher than mean production and pockets of less or no productive effort.Now, traditionally the Left has always wanted to distribute wealth, money or equivalent in resources from they who have to to they who have not.This is almost always resisted by they who have, especially they who worked and saved to get what they have.On the other hand, they who have little or nothing can almost always be persuaded that redistribution is a good thing, since they would stand to gain money or resources for free, albeit from others who have worked and saved to get what they have and who will not be compensated in fact, regardless of the assurances or bits of worthless paper they would get in exchange.It has been said that the rich should give up their wealth to give to the poor.The above authors do not suggest that they themselves are giving up their assets and income to give to the poor.The rich will never freely give up their wealth, or part of it, to give to the poor.They have ways and means to put their wealth out of reach of redistributing agents who have the wherewithal to effect such a redistribution.In the EU, redistribution has occurred through CAP and the many subsidy schemes of varied extent and nature.This has been grossly abused through fraud in one form or another.If these schemes are targeted to increase production or efficiency or to benefit the poor who have no way to honestly earn a living, fine.The economy is not hurt thereby.However, in the EU the economy has been hurt severely and taxed almost to a standstill by schemes and scams which encourage indolence, inefficiency, waste of resources, fraud and bureaucratic creaming off of productive effort to the extent of limiting motivation towards productive effort and efficiency and increasing the black economy which reduces the tax-take and increases the cost of levying tax.On top of that, the international financial system has been subsidised to a huge amount by the citizens of Europe.Then there QE and similar schemes operated by the ECB, which, again, subsides certain internationally-based financial operators paid for by Eurozone citizens/taxpayers without the slightest economic benefit in return.Now the authors would suggest that they who have assets and income should have some of it taken from them to give to people who are poor, countries who are poor, perhaps, as a levy on productive and thrifty people and countries to keep indolent people and peoples and nation-states such as Greece in clover?Is this to be an unemployment benefit for countries?It is worse than daft.It will wreck the incentive of productive people to produce more than they need to just survive.It will increase the incentive for people to take what they can for free and do nothing much productive at all.Economically insane.It would wreck the EU economy, if people in the northern countries in Europe would put up with it, which they would not.The trouble with the West is this; too many sinecures and people in positions of getting money and resources for no productive effort whatever.The authors are suggesting pie-in-the-sky, money-for-nothing.