Willingness to Pay for Improved Public Education and Public Health Systems: The Role of Income Mobility Prospects

We analyze if upward or downward mobility prospects affect individuals’ willingness to pay higher taxes or give part of their income to improve the public health system or improve public education. Data is from the 3rd wave of the Life in Transition Survey, which offers several improvements over earlier waves. Our findings are partly in line with the theory. Individuals who expect to move up the socio-economic ladder within the next four years, who, at the same time, are not too risk averse, are less willing to pay to improve public health systems and public education than those who do not expect to move up the socio-economic ladder. Very risk averse individuals who expect to move up the socioeconomic ladder, are, however, more willing to pay than individuals without any upward prospects. We find no evidence in favor of a prospect of a downward mobility effect. Individuals who do expect to move down the socio-economic ladder within the next four years are not more or less willing to pay to improve public health systems and public education than those who do not expect to move down the socio-economic ladder.