Inequality, Labor Market Segmentation, and Preferences for Redistribution

50 Pages Posted: 14 Aug 2014

See all articles by James E. Alt

James E. Alt

Harvard University - Department of Government

Torben Iversen

Harvard University

Date Written: August 11, 2014

Abstract

We formalize and examine two overlapping models that show how rising inequality combined with ethnic and racial heterogeneity can explain why many advanced industrial countries have experienced a drop in support for redistribution as inequality has risen. One model, based on altruism and homophily, focuses on the effect of increasing “social distance” between the poor and the middle class, especially when minorities are increasingly overrepresented among the very poor. The other, based on self-interest, combines an “insurance” model of preferences for redistribution with increasingly segmented labor markets, in which immigration of workers without recognized skills leaves most native workers better off but intensifies competition for low-end jobs. Empirically, when we estimate parameters from the two models using data from multiple waves of ISSP surveys, we find that labor market segmentation, previously omitted in this literature, has more consistent effects than social distance.

Suggested Citation

Alt, James E. and Iversen, Torben, Inequality, Labor Market Segmentation, and Preferences for Redistribution (August 11, 2014). Available at SSRN: https://ssrn.com/abstract=2478845 or http://dx.doi.org/10.2139/ssrn.2478845

James E. Alt

Harvard University - Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Torben Iversen (Contact Author)

Harvard University ( email )

Institute for Quantitative Social Science
1737 Cambridge Street
Cambridge, MA 02138
United States
617-384-5847 (Phone)
617-496-5149 (Fax)

HOME PAGE: http://www.people.fas.harvard.edu/~iversen/index.htm

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