Nonmonotonic Demand for Income Redistribution Benefits: The Case of AFDC

Two different motives are often advanced to explain taxpayer (nonrecipient) support for income redistribution programs. The first motive is the result of interdependent utilities between nonrecipients and the recipients of redistribution program benefits.' The source of this interdependence could be taxpayer altruism; alternatively, redistribution might be seen as one way to alleviate the potential for crime or social unrest. Recent theoretical analyses have suggested a second motiveincome redistribution programs act as protection against the possibility of unforseen loss in personal income [5; 6; 21; 32]. Researchers using panel data find widespread random and temporary movements in individual income, poverty, and welfare program use that would seem to suggest a potentially significant insurance demand for redistribution programs.2 The results from one study, for example, indicate that while four to five percent of the total U.S. population could be classified as persistent recipients of welfare program benefits between 1969 and 1978 (receiving program benefits in at least five of those years), over one-quarter of the U.S. population participated in welfare programs at least once over this same ten year period [9, 74]. In the past, researchers estimating nonrecipient support for income transfer programs have considered only one of these two motives, while ignoring the other.3 This paper extends the examination of the demand for income redistribution by integrating the public good and social insurance demand motives into one model. The first part of the paper sets up the individual's decision model for income redistribution. One consequence of interacting the public good and social insurance motives into one model is that support for higher benefit payments is expected to come from the tails of the income distribution. Low-income individuals (both recipients and nonrecipients) benefit directly from the reduced risk of income randomness, while high-income