Ignoring Economics: Why rich countries find it easier to expand welfare states
Abstract / Why do richer countries have larger welfare states? Existing explanations emphasize the role of industrialization processes or simultaneous increases in inequality. Direct effects of economic prosperity have received little attention. I argue that if the marginal utility of consumption is diminishing, citizens in richer countries should be less responsive to economic incentives. With citizens ignoring economics, politicians have to serve less conflicting demands, making it easier for richer countries to expand welfare states. This argument is supported with an empirical analysis of 20 European countries. I consider economic incentives from present incomes as well as income expectations, and show that such incentives are less consequential for redistributive preferences in richer countries. I find no support for existing theories that emphasize the role of economic inequality.
Discussant / Evelyne Hübscher