Is Income Redistribution a Form of Insurance, a Public Good or Both?

IEB Working Paper N. 2014/33

41 Pages Posted: 9 Dec 2014

See all articles by Peter Backus

Peter Backus

University of Warwick; University of Southampton

Alejandro Esteller-More

University of Barcelona

Date Written: November 3, 2014


This paper is an empirical study of redistributive preferences. Our interest is what motivates net contributors to support redistributive policies. Using instrumental variable estimation and exploiting a particularity of the Spanish labour market we estimate how workers’ declared preferences for unemployment benefits spending respond to changes in the local unemployment rate. We then decompose this response into the part explained by risk aversion, and thus demand for insurance, and the part explained by the public goods nature of redistribution. Our results suggest that the declared preferences of workers for unemployment benefits spending are driven by demand for insurance rather than any public goods component. We show how these results suggest that preferences for redistribution in the form of unemployment benefits are driven by insurance considerations rather than by any public goods consideration.

Keywords: Redistribution, Preference formation, Public goods

JEL Classification: D64, H53, H77

Suggested Citation

Backus, Peter and Esteller-More, Alejandro, Is Income Redistribution a Form of Insurance, a Public Good or Both? (November 3, 2014). IEB Working Paper N. 2014/33, Available at SSRN: or

Peter Backus

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

University of Southampton

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Alejandro Esteller-More (Contact Author)

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007

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