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Research Institute of Industrial Economics (IFN) Working Paper Series

No 453:
Social Norms, the Welfare State, and Voting

Assar Lindbeck (), Sten Nyberg and Jörgen Weibull

Abstract: This paper analyzes the interplay between economic incentives and social norms in a public finance context. We assume that to live off one's own work is a social norm, and that the larger the population fraction adhering to this norm, the more intensely it is felt by the individual. It is shown that this may give rise to multiple equilibria and to non-linearities that do not arise from economic incentives alone. In the model, individuals also vote on taxes and transfers. Hence, the social norm influences both their economic and political behavior. We show that monotone and continuous changes in external factors may result in non-monotone, and even discontinuous, changes in the political equilibrium.

Keywords: WELFARE STATE; ETHICS; (follow links to similar papers)

JEL-Codes: D60; D63; D69; (follow links to similar papers)

32 pages, April 1996

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