Understanding changes in attitudes towards redistribution after the great recession
To account for heterogeneity, we apply latent class methodology to group individuals based on preferences for redistribution. We identify four preference groups, all of whom have less demand for redistribution after the financial crisis. The groups most opposed to redistribution after the Great Recession also report the lowest in confidence in government in 2010.
Cluster membership is predicted by personal characteristics, especially political party affiliation, and government trust. Using fixed effects models conditional on cluster membership, we find that confidence in government after the recession is not only a distinctive characteristic of preference groups but also a significant determinant of demand for redistribution. This relationship is partially explained by political preferences. Republicans in particular are more likely to associate government mistrust with low (no) demand for government action in reducing income differences after the Great Recession.
There is considerable movement within and between preference clusters from before to after the financial crisis. Therefore, we estimate clusters of changes in redistribution preferences and find five clusters characterize these changes. These results show that changes in demand for redistribution are primarily explained by changes in confidence in government and by political party affiliation.
Our findings are suggestive and contribute to a growing body of work that shows a relationship between redistribution preferences and government trust. However, the falsification tests reveal that government mistrust specifically reduces demand for redistribution, and a loss in confidence in government/institutions after financial crisis does not lead to a general decrease in demand for other government programs (i.e. spending on education, military arms, or transportation infrastructure).