Preferences for International Redistribution: The Divide Over the Eurozone Bailouts

Abstract

Why do voters agree to bear the costs of bailing out other countries? Despite the prominence of public opinion in the ongoing debate over the eurozone bailouts, voters' preferences on the topic are poorly understood. We conduct the first systematic analysis of this issue using observational and experimental survey data from Germany, the country shouldering the largest share of the EU's financial rescue fund. Testing a range of theoretical explanations, we find that individuals' own economic standing has limited explanatory power in accounting for their position on the bailouts. In contrast, social dispositions such as altruism and cosmopolitanism robustly correlate with support for the bailouts. The results indicate that the divide in public opinion over the bailouts is not drawn along distributive lines separating domestic winners and losers. Instead, the bailout debate is better understood as a foreign policy issue that pits economic nationalist sentiments versus greater cosmopolitan affinity and other-regarding concerns.

Keywords: EU, bailouts, public opinion, political behaviour, redistribution

JEL Classification: F5, P16, F34, D72