Household Balance Sheets and Social Policy Preferences: New Survey Evidence

Abstract

The financial crisis affected citizens across developed economies, heightening economic insecurity. While macro-economic indicators in the US and, if more slowly, in Europe are picking up, many households continue to be deeply affected by wealth and credit echoes from the crisis: wealth positions deteriorate, debt levels rise, and the access to short-term credit has been tightened. At the same time, changes in the structures of labor markets, with more flexible, short-term positions, are also a source of increased insecurity for many households. However, there is important variation across countries and across households, both in the build-up of balances before the crisis and in subsequent deleveraging. Little research has focused on the political consequences of diverging wealth and debt trajectories across countries and how these differences relate to variation in labor market and social policy institutions as well as to variation in lending markets. This is so, in part, because of a lack of data sets that combine detailed household-level economic data on incomes, assets and liabilities with public opinion data across countries. In this paper, we study the relationship between wealth, access to credit, labor market position and social policy preferences from a comparative perspective. We ask: How do differences in capital markets and mortgage institutions and policies affect household balance sheets, and how does the composition of such balance sheets shape demand for specific types of social policies? What is the influence of institutional differences in the realm of labor markets and welfare regimes on wealth trajectories? We present preliminary results from an original large-scale cross national survey fielded in nine advanced democracies including more than 20,000 respondents in total. The survey is unique in that it collects very detailed information on household income, savings, wealth holdings and credit market opportunities and combines this with standard and new measures of labor market circumstances and domain-specific political preferences and attitudes. Combining cross-country variation with micro-level data allows us to generalize from in-depth studies of income, wealth, and political preferences in individual countries, and point to important exceptions from general rules due to specific credit or labor market institutions.

Keywords: social policy, ecoomic, capital markets, policy, policies, balance sheets