Who Wants a Tax Break?

Who Wants a Tax Break?

THE SOURCE: “Culture, Context, and the Taste for Redistribution” by Erzo F. P. Luttmer and Monica Singhal, in American Economic Journal: Economic Policy, Feb. 2011.

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In the hyper-rational world described by neoclassical economists, individuals prefer tax and redistributive policies that are in concert with their self-interest. But researchers have long noted variations from country to country in citizens’ feelings about redistribution: Europeans are more likely to believe that poverty is the consequence of bad luck and support more extensive redistribution policies, whereas Americans tend to point to laziness and are reluctant to support such policies. Is the gap the product of different economic institutions and situations, or is it something economics can’t account for—culture?

Two economists have now come up with a strategy to tease out those differences. Erzo F. P. Luttmer of Dartmouth College and Monica Singhal of Harvard’s Kennedy School of Government looked at immigrants’ political beliefs to see whether newcomers respond to the economic incentives of their adopted homelands or maintain preferences more in line with the culture of their countries of origin. They find that culture plays a significant role. While people are influenced by their income, the effect of the culture of their home country is just as great, persisting even after 20 years in a new land. Additionally, the children of immigrants retain the policy preferences of their parents’ home country, but to a lesser extent.
The authors find that in countries with greater cultural diversity, immigrants tend to more strongly maintain the outlook of their home country. In places that are more homogenous, new arrivals must assimilate faster, and immigrants are more strongly shaped by the culture around them.
Even if the newcomers themselves have little impact on policy, that their values are transmitted to their children means there may be longer-term policy implications of large immigrant influxes. But of course, it’s not only foreigners who are influenced by culture—everyone is. It’s just when looking at immigrant populations that it’s possible to see culture’s influence clearly.

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