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Values and Beliefs in Political Economy

Paper Session

Friday, Jan. 4, 2019 2:30 PM - 4:30 PM

Atlanta Marriott Marquis, International 9
Hosted By: American Economic Association
  • Chair: Panu Poutvaara, University of Munich and Ifo Institute

Democratic Values and Institutions

Timothy Besley
London School of Economics
Torsten Persson
Stockholm University


This paper builds a model of the two-way interaction between democratic
values and institutions to bridge sociological research,
focusing on values, with economics research, which studies strategic
decisions. Some citizens hold values that make them protest to
preserve democracy with the share of such citizens evolving endogenously
over time. There is then a natural complementarity between
values and institutions creating persistence without assuming any
form of commitment. The approach unifies ideas in the literature,
explains observed patterns in the data on democratic values and
political institutions, and suggests new insights into sources of heterogeneity
in values. (JEL D02, D72)

International Integration and Social Identity

Boaz Abramson
Stanford University
Moses Shayo
Hebrew University of Jerusalem


Abstract We develop a simple framework to study the interplay between identity politics and international integration, when identities themselves are endogenous. Contrary to widespread intuitions, we find that a robust union does not require that all members share a common identity. Nor is a common identity likely to emerge as a result of integration. The general result is that a union is more fragile when periphery countries have high ex-ante status. Low-status countries are less likely to secede, even when between-country economic differences are large and although equilibrium union policies impose significant economic hardship. We trace the implications of the model for the stability and challenges facing the European Union and the Eurozone.

Redistributive Politics with Target-Specific Beliefs

Christina M. Fong
Carnegie Mellon University
Panu Poutvaara
University of Munich and Ifo Institute


A large literature in economics has focused on a perennial tension between the generosity of means-tested transfers and the work efforts of recipients. Stronger individual support for means-tested transfers is associated with beliefs that the poor are industrious rather than lazy. A separate literature in economics has focused on support for general redistribution from the rich to the poor and its relationship with general beliefs that luck rather than effort determines income (or mobility). This paper takes a first step toward unifying these literatures by incorporating target-specific beliefs about the rich and the poor into a model that broadly follows key insights from the literature on general beliefs and preferences for redistribution. We develop and test a theory about individual support for redistribution in the presence of target-specific beliefs about the causes of low and high incomes. Our theory predicts that target-specific beliefs about the poor matter most for preferences about transfers to the poor, and target-specific beliefs about the rich matter most for preferences about taxation of the rich. In U.S. attitudinal data, we find that 42% of respondents have target-specific beliefs, in that they give different reasons for being rich than for being poor. Beliefs about why the poor are poor have a substantially and significantly larger association with preferences for transfers to the poor and beliefs about why the rich are rich have a substantially and significantly larger association with preferences for taxing the rich. We also test our theory using data from a module that we wrote for the 2014 innovation sample of the German Socioeconomic Panel (SOEP). All predictions of the theory hold also in Germany. Finally, experimental evidence on giving money to real welfare recipients provides additional support for our theory.
Toke Aidt
University of Cambridge
Uwe Sunde
Univeristy of Munich
Sera Linardi
University of Pittsburgh
JEL Classifications
  • D6 - Welfare Economics
  • D7 - Analysis of Collective Decision-Making