The Health Dimension of Redistribution

While the literature on social preferences for redistribution has largely focused on income and consumption inequality, the paper presented in this Mannheim Applied Seminar examines the extent to which redistributive preferences depend on an additional margin–health status. The authors conduct a large-scale survey experiment of money allocation games designed to separately identify redistributive preferences over income and health. They find that respondents prefer to allocate transfers to sicker individuals, holding income fixed, and to lower income individuals, holding health fixed, but there is substantial heterogeneity in preferences across health conditions. The results imply that the marginal social value of public expenditures on individuals suffering from particular types of illnesses could be very large; which consequently affects the equity-efficiency trade-off underlying optimal policy design.