Redistribution Preferences and Life-Cycle Income

Abstract

Most distributive theories in political economy understand individuals to be motivated by material self-interest, often approximated by their current positions in the income distribution. In this paper, we challenge this traditional view. The key to our argument is that individual preferences for more or less redistribution are the result of agents maximizing their life-cycle income, and not just their current income. Based on the labour economics literature on life-cycle profiles (Mincer 1974, Solon: 1992, Baker 1997, Haider & Solon 2006), we propose a simple way of estimating the present value of an individual's expected future income. As expectations about life-cycle incomes are the resultant of the interplay of age and education, our approach offers promising new insights into the effects of these variables on redistribution preferences. We use data from the European Social Survey to estimate expected life-cycle incomes and evaluate the extent to which our approach improves our understanding of distributive politics.