Group Loyalty and the Taste for Redistribution

Abstract

Interpersonal preferences—preferences that depend on the characteristics of others—are typically hard to infer from observable individual behavior. As an alternative approach, this paper uses survey data to investigate interpersonal preferences. I show that self‐reported attitudes toward welfare spending are determined not only by financial self‐interest but also by interpersonal preferences. These interpersonal preferences are characterized by a negative exposure effect—individuals decrease their support for welfare as the welfare recipiency rate in their community rises—and racial group loyalty—individuals increase their support for welfare spending as the share of local recipients from their own racial group rises. These findings help to explain why levels of welfare benefits are relatively low in racially heterogeneous states.