Direct evidence on income comparisons and their welfare effects

This paper provides direct evidence that comparisons exert a significant effect on subjective well-being. It also evaluates the relative importance of different types of benchmarks. Internal comparisons to one's own past living standard outweigh any other comparison benchmarks. Local comparisons (to one's parents, former colleagues or high school mates) are more powerful than self-ranking in the social ladder. The impact of comparisons is asymmetric: under-performing one's benchmark always has a greater welfare effect than out-performing it (in absolute value). Comparisons which reduce satisfaction also increase the demand for income redistribution, but there, the relative impact of subjective ranking is preponderant.subjective well-being ; income comparisons ; demand for income redistribution ; internal and external benchmarks ; transition

The Emerging Aversion to Inequality: Evidence from Poland 1992–2005

This paper provides an illustration of the changing tolerance for inequality in a context of radical political and economic transformation and rapid economic growth. We focus on the Polish transition experience, and explore individuals' self-reported attitudes. Using unusually long and frequent (monthly) representative surveys of the population, carried out by the Polish poll institute (CBOS) from 1992 to 2005, we identify a structural break in the relationship between income inequality and subjective well-being. The downturn in the tolerance for inequality (1997) coincides with increasing distrust of political elites.inequality, subjective satisfaction, breakpoint, transition

The emerging aversion to inequality - Evidence from long subjective data

This paper provides evidence of a change in the relationship between individual satisfaction with the state of country's economy and income inequality during transition from a command to market economic system. Using data from a series of extensive and frequent surveys of Polish population, we identify a structural break in this relationship. In the beginning of transition, an increase in income inequality is interpreted by population as a positive signal of increased opportunities; this sentiment is particularly strong among older people and people with right-wing political views. Later in the transition period, increased inequality becomes an important reason for dissatisfaction of the public with the country's economic situation and reforms, as people become more skeptical about the legitimacy of income generation process. We also provide direct evidence from opinion polls of a change in the public sentiment about income inequality.inequality ; subjective well-being ; growth ; breakpoint ; transition

Democracy, Market Liberalization and Political Preferences

This paper questions the conventional wisdom concerning the sequencing of political and economic reforms in developing countries. We exploit the specific situation of frontier-zones as well as the considerable regional variations in culture and economic development in the countries of Central and Eastern Europe and the former Soviet Union. We estimate the impact of market development and democratization on subjective political preferences. Taking advantage of a new survey conducted in 2006 by the European Bank for Reconstruction and Development and the World Bank in 28 post-transition countries, we find a positive and significant effect of democracy on support for a market economy, but no effect of market liberalization on support for democracy. Our results are robust to the use of various indices of market liberalization and democracy and alternative measures of political preferences.market and democracy ; political preferences ; spatial regression discontinuity ; transition economies

Segregation, entrepreneurship and work values: the case of France

This paper studies the interaction between labor market integration, the evolution of "work values" and entrepreneurial capital inside minority communities. A simple model of labor market segmentation with ethnic capital and endogenous transmission of cultural values inside minority groups is presented. It emphasizes the role of entrepreneurial capital as an important driver of labor market integration and as a promoter of meritocratic work values inside the community. Using a new French survey rich in attitudinal variables, it then proposes an empirical illustration, focusing on the dissimilarity between the labor market integration of South European versus North African second generation immigrants in France. It shows that the contrasted economic and cultural integration of these minorities can be explained away by their different levels of entrepreneurial capital.social capital ; ethnic segmentation ; work values ; labor discrimination

Why Populist Democracy Promotes Market Liberalization

Using a new set of micro evidence from an original survey of 28 transition countries, we show that democracy increases citizens’ support for the market by guaranteeing income redistribution to inequality-averse agents. Our identification strategy relies on the restriction of the sample to inhabitants of open borders between formerly integrated countries, where people face the same level of market development and economic inequality, as well as the same historically inherited politico-economic culture. Democratic rights increase popular support for the market. This is true, in particular, of inequality-averse agents, provided that they trust political institutions. Our findings suggest that one solution to the recent electoral backlash of reformist parties in the former socialist block lies in a deepening of democracy.democracy, income inequality, redistribution, market liberalization, trust

How populist democracy promotes market liberalization

Using a new set of micro evidence from an original survey of 28 transition countries, we show that democracy increases citizens' support for the market by guaranteeing income redistribution to inequality-averse agents. Our identification strategy relies on the restriction of the sample to inhabitants of open borders between formerly integrated countries, where people face the same level of market development and economic inequality, as well as the same historically inherited politico-economic culture. Democratic rights increase popular support for the market. This is true, in particular, of inequality-averse agents, provided that they trust political institutions. Our findings suggest that one solution to the recent electoral backlash of reformist parties in the former socialist block lies in a deepening of democracy.democracy ; income inequality ; redistribution ; market liberalization ; trust

Segregation, Entrepreneurship and Work Values: The Case of France

This paper studies the interaction between labor market integration, the evolution of “work values” and entrepreneurial capital inside minority communities. A simple model of labor market segmentation with ethnic capital and endogenous transmission of cultural values inside the minority group is presented. It emphasizes the role of entrepreneurial capital as an important driver of labor market integration and as a promoter of meritocratic work values inside the community. The case of South European and North African second generation immigrants in France is then empirically studied as an example, contrasting strongly how the differential economic and cultural integration in the labor market correlates with the differential level of entrepreneurial capital of the two communities.social capital, ethnic segmentation, work values, labor discrimination

The Emerging Aversion to Inequality: Evidence from Poland 1992-2005

This paper provides an illustration of the changing tolerance for inequality in a context of radical political and economic transformation and rapid economic growth. We focus on the Polish transition experience, and explore individuals' self-reported attitudes. Using unusually long and frequent (monthly) representative surveys of the population, carried out by the Polish poll institute (CBOS) from 1992 to 2005, we identify a structural break in the relationship between income inequality and subjective well-being. The downturn in the tolerance for inequality (1997) coincides with increasing distrust of political elites.inequality, subjective well-being, breakpoint, transition

Should market liberalization precede democracy? Causal relations between political preferences and development

This paper is dedicated to the relation between market development and democracy. We distinguish contexts and preferences and ask whether it is true that the demand for democracy only emerges after a certain degree of market development is reached, and whether, conversely, democratization is likely to be an obstacle to the acceptation of market liberalization. Our study hinges on a new survey rich in attitudinal variables: the Life in Transition Survey (LITS) conducted in 2006 by the European Bank for Reconstruction and Development and the World Bank, in 28 post-Transition countries. Our identification strategy consists in relying on the specific situation of frontier-zones. We find that democracy enhances the support for market development whereas the reverse is not true. Hence, the relativist argument according to which the preference for democracy is an endogenous by-product of market development is not supported by our data.market and democracy ; sequencing of development ; transition economies ; attitudinal variables ; cross-countries survey