What Kind of Welfare State Do You Prefer? An Experiment on Framing the Social Insurance Scheme

35 Pages Posted: 12 Mar 2015

See all articles by Francesco Farina

Francesco Farina

University of Siena - Department of Economics

Stefania Ottone

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Ferruccio Ponzano

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Date Written: March 9, 2015

Abstract

A real-effort experiment is conducted in order to detect preferences for one of three different models of Welfare State characterized by different schemes of tax-and-transfers. Experimental subjects have to choose (both under and without veil of ignorance concerning their position in the society created in the lab) among: a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; b) an actuarially-fair scheme where low-ability and low-earnings subjects bear individual full responsibility for risk exposure; c) a progressive scheme where mutual risk insurance spreads risk across all subjects, so that low-ability and low-earnings individuals are compensated. The aim is to investigate how subjects posit with respect to the task performed by the Welfare State, which is the interaction between inequality of opportunity and income inequality facing low-ability and low-earnings individuals due to their relatively higher risk exposure. Our most relevant finding is that preference is not much motivated by a justice principle, but mainly by the expectation on one’s own position in the society.

Keywords: Welfare State, insurance, redistribution, proportional system, actuarially-fair system, progressive system

JEL Classification: C9, D31, D63, H26

Suggested Citation

Farina, Francesco and Ottone, Stefania and Ponzano, Ferruccio, What Kind of Welfare State Do You Prefer? An Experiment on Framing the Social Insurance Scheme (March 9, 2015). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 295, Available at SSRN: https://ssrn.com/abstract=2575546 or http://dx.doi.org/10.2139/ssrn.2575546

Francesco Farina

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy

Stefania Ottone (Contact Author)

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Ferruccio Ponzano

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

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