Who wants to redistribute?: The tunnel effect in 1990s Russia

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Abstract

Support for governmental redistribution tended to be greater for the poor than the rich in a representative sample of Russian adults in 1996. However, support for redistribution is higher amongst those who expect their welfare to fall, and this effect is strongest amongst the currently well-off. A rising trajectory inhibits demand for redistribution. Support is also stronger in rural areas, amongst those with less schooling, those who fear losing their job, the elderly, and amongst women. Our results are consistent with Albert Hirschman’s idea of a ‘tunnel effect’, whereby prospects of mobility (in both directions) influence demand for governmental redistribution.

Introduction

One expects that policies that redistribute incomes from the rich to the poor will be favored by the poor and opposed by the rich. Such an alignment of interests seems natural, given their respective gains and losses.

But this may be too simple a model. Governmental redistributions are not normally one-off events, so expectations of future welfare will come into play. Currently poor people on a rising trajectory may well oppose redistribution, and currently well-off people on a downward trajectory may well favor it. There may also be heterogeneity in tastes for inequality, or in beliefs about the costs and benefits of redistribution, or about the government’s ability to redistribute in a predictable way. For these and possibly other reasons, not all currently poor people appear to favor redistribution, and not all currently rich people oppose it.

A better understanding of these issues can throw light on the political-economy of redistributive policy and the causes of inequality. The prospect of upward mobility has been used to explain why rising inequality might be tolerated in rapidly developing countries. Albert Hirshman dubbed this the ‘tunnel effect’:

“Suppose that I drive through a two-lane tunnel, both lanes going in the same direction, and run into a serious traffic jam. No car moves in either lane as far as I can see (which is not very far). I am in the left lane and feel dejected. After a while the cars in the right lane begin to move. Naturally my spirits lift considerably, for I know the jam has been broken and that my lane’s turn to move will surely come at any moment now. Even though I still sit still, I feel much better off than before because of the expectation that I shall soon be on the move” (Hirshman, 1973, p. 545).

In the spirit of Hirshman’s idea, recent theoretical work has shown how past mobility experiences can have persistent effects on attitudes to redistribution at given current incomes, allowing a deeper understanding of redistributive politics (Piketty, 1995). Upward mobility can also explain why some currently poor people resist lasting redistributions, and (hence) why we do not see more pressure for redistribution in democracies where (given that income distribution is skewed) the median voter will have an income below the mean; Bénabou and Ok (1998) provide a formal model of such behavior, which they term the ‘prospect for upward mobility hypothesis’.1

Of course, by the same token, the prospect of falling income can promote a desire for redistribution amongst the currently non-poor. Continuing Hirshman’s analogy to a congested tunnel:

“But suppose that the expectation is disappointed and only the right lane keeps moving: in that case I, along with my left lane cosufferers, shall suspect foul play, and many of us will at some point become quite furious and ready to correct manifest injustice by taking direct action (such as illegally crossing the double line separating the two lanes)” (Hirschman, 1973, p. 545).

The perceived role of governmental redistribution of current incomes as a form of insurance could well be a strong motive in some settings. Suppose that income redistribution by government is seen as a safety net to protect against adverse shocks. One can then expect that demand for redistribution by government will be lower in a socially cohesive setting in which reciprocal relationships (though possibly unequal ones, such as based on patronage) offer security, than in an individualistic, socially fragmented one.2 A further implication is that, in settings in which there are significant down-side risks, one might well find strong support amongst currently non-poor people for programs targeted to the poor.3

This paper attempts to understand why some people favor governmental redistribution and others do not, and (in particular) whether there is a ‘tunnel effect’. We hope to throw light on a number of questions, including: Do the currently poor favor inequality-reducing redistribution, and the current rich oppose it? Do people expect redistribution to be persistent and so think inter-temporally in deciding how much they want governments to intervene in the distribution of income? In particular, are those who expect to be better off in the future less inclined to support redistribution, and (reversing the argument) do perceptions of vulnerability to down-side income risk stimulate demand for redistribution? And how do perceptions of social exclusion affect the demand for redistribution? For example, do people who feel politically marginalized have a higher demand for redistribution at any given level of current income?

Russia in the 1990s is an interesting setting for examining these issues. After the breakup of the communist system and movement toward a free market economy, inequality of incomes increased substantially in Russia. Between 1992 and 1996, the Gini index of income inequality is estimated to have risen from 0.41 to 0.49 (Lokshin and Popkin, 1998). Subjective assessments of psychological well-being suggest rising dissatisfaction in the 1990s (Rose and McAllister, 1996, Ravallion and Lokshin, 1999). Early post-reform expectations were disappointing for many. The survey data we will use in this paper indicate that, between 1992 and 1996, the proportion of Russian adults who thought that their family’s life would get better over the next 12 months dropped from 55% (of 11,300 sampled adults) to 41% (of 7000 adults). The left lane was clearly not moving for the bulk of Russians in this period. But there was a moving right lane; a small minority of people were seeing rising living standards. Our data (discussed below) indicate that 8.4% of adults saw real consumption gains for their families in both 1995 (compared to 1994) and 1996 (1995).

We will use an unusually rich household survey for Russia in 1996. The survey included standard socio-economic data on incomes, consumptions, demographics, education attainments and so on. In addition, the survey included a range of more subjective questions on perceptions of welfare and how it is expected to change over time. It also included a question on whether each sampled adult was for or against governmental efforts to redistribute income; in particular, respondents were asked: “Do you agree or disagree that the government must restrict the income of the rich?” We will call this the ‘restrict the rich?’ question (RRQ). Seventy-two percent of adults answered that they were in favor of restricting incomes of the rich in 1996.

The RRQ was not asked in previous survey rounds, so we cannot say if the proportion increased during the 1990s. However, since the RRQ was asked in a comprehensive multi-purpose socio-economic survey, we can use our data to explore the reasons why some people favored restricting incomes of the rich and others did not. In particular, we can see how expectations interacted with current living standards and other factors. We do not think it plausible that there is sufficient mobility that the bulk of the poorest decile (say) in Russia would oppose reducing incomes of the rich because they think they will become rich in the foreseeable future. As we shall see, there is little resistance to redistribution amongst the poorest in Russia. However, it is more interesting to look closely at how the currently ‘rich’ feel in this setting. We shall show that currently well-off individuals who expected their welfare to improve tended to oppose redistribution, while those who feared decline favored it.

The next section outlines a rudimentary model of preferences for governmental redistribution. Our data are described in Section 3. Section 4 presents our results for Russia. Section 5 concludes.

Section snippets

Preferences for redistribution in theory

A natural interpretation of the ‘restrict the rich?’ question is that some form of tax is contemplated, to be levied on incomes above some level.4 That level, and what would be done with

Data

It is clearly difficult to formulate simple yet revealing questions about subtle aspects of personal attitudes to governmental redistribution. The RRQ does not directly posit any specific redistributive tax scheme. That would have entailed a more complex question, which surveyors might reasonably have been wary of. The RRQ does, however, have the advantage for our purpose that it pins down one key aspect of the idea of ‘redistribution’, namely that the ‘rich’ are the donors; by contrast, asking

Results

Table 2 gives the sample proportions who supported restricting incomes of the rich by deciles of respondents ranked by their 2-year mean household consumptions (normalized by the household specific poverty lines). Fig. 1 presents the same basic information in the form of smoothed scatter plots of the answers to the RRQ against the same measure of consumption.7 There is a tendency for support for

Conclusions

It is plain from our investigation that attitudes to governmental redistribution in Russia are driven by more than whether or not a person thinks he or she would currently gain or lose. Seventy-two percent of the nearly 7000 adults surveyed in October 1996 indicated that they favor governmental action to reduce incomes of the rich. But the remaining 28% were clearly not just the currently ‘rich’ in any obvious sense.

The currently poor do tend to be very supportive of the redistribution proposed

Acknowledgements

The authors thank Gary Fields, Branko Milanovic, Lant Pritchett, Dominique van de Walle and the journal’s referee and editor for their comments. The findings, interpretations, and conclusions of this paper are those of the authors, and should not be attributed to the World Bank, its Executive Directors, or the countries they represent.

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