Labor Market Risks, Other-Regarding Concerns, and the Institutional Arrangement of the Welfare State


Social insurance models prominently argue that selfish demand for future bene- fits explains support for redistribution among the rich. In this article, I posit that social insurance defines the scope of other-regarding preferences. The welfare state provides benefits to insure against individual exposure to labor market risks. Some welfare states provide social safety nets and benefits are provided in equal amounts to everyone, while in others, benefits are related to previous earnings and stabi- lize individual incomes over the life-cycle. These structural differences define the relative impact of labor market risks on individual income, and consequently, the stability of one’s living status over time. I employ simulated unemployment replacement rates to construct a measure for the governing principle of social insurance and show that average support for redistribution is higher in earnings-related systems. Labor market risk has a stronger impact on redistribution preferences in flat-rate systems. Experimental evidence shows that risky endowments influence transfer shares negatively. Previous social insurance approaches have not taken into account the other-regarding perspective.