Why Does Income Redistribution Differ Between Countries? Comparative Evidence From Germany and Switzerland

There is wide agreement among economists that the redistribution of income has become the core activity of politicians. Why is it, then, that the amount of income redistribution differs so widely between industrial countries, with social benefits at 12 percent of GDP in the United States and Switzerland on the one hand, but almost 25 percent of GDP in Germany on the other?

Interpreting these figures as reflecting national equilibria, one is led to examine determinants of the demand for and supply of the service ‘income redistribution’. Indeed, these determinants are found to differ between countries. While there is a good deal of empirical evidence with respect to the supply side, the determinants of ‘pure’ demand for redistribution are seldom identified. Experimental evidence from Germany and Switzerland represents a first step in filling this gap.