Chasing Gold, Overlooking Welfare: Exposure to Wealth in Everyday Life and Support for Social Spending.

Abstract

According to conventional wisdom, exposure to wealth in everyday life decreases subjective economic status, resulting in higher support for redistribution and social spending among less-affluent citizens. However, sociological and behavioral economics research suggests an additional psychological effect that has been overlooked in the inequality literature: the desire of less-affluent individuals to emulate the consumption of the wealthy. This doctoral dissertation contributes to the debate on the redistributive effects of subjective inequality perceptions by examining the relationship between exposure to wealth and attitudes toward social spending from this novel theoretical perspective. The central argument is that exposure to wealth biases preferences for social spending toward the present. Everyday exposure to displays of wealth decreases individuals' subjective economic status. As a result, less affluent citizens emulate the consumption of wealthier individuals to mitigate the psychological and economic costs of perceived relative deprivation. This, I argue, results in preferences for policies with immediate rewards, like lower taxes, over policies with long-delayed benefits, such as social welfare programs traditionally associated with redistribution. The dissertation comprises of three research papers combining both observational and experimental data from various advanced democracies. I find that exposure to conspicuous consumption in the local environment correlates with reduced support for social spending and higher opposition to taxes among citizens with incomes below the national median. Furthermore, I show that subjective perceptions of low economic status are associated with lower support for tax increases aimed at funding social spending, at the same time as they are positively correlated with demand for reducing inequality. Finally, while the experimental results are inconclusive, I do find evidence that exposure to displays of wealth does not only evoke feelings of social distance from the rich, as conventionally assumed, but also feelings of admiration, envy, and an explicit desire for economic status improvement and for emulating the living standards of wealthier individuals. In conclusion, this dissertation nuances the debate on the redistributive effects of subjective inequality perceptions, as it shows that exposure to displays of wealth in the local environment and subjective perceptions of low economic status are associated with demand for policies with immediate economic rewards at the expense of social welfare programs. By increasing preferences for gold over welfare, exposure to wealth may reinforce, rather than reduce, inequality.