The American Dream and Support for the Social Safety Net: Evidence from Experiment and Survey Data

Abstract

I propose the status quo bias hypothesis, which predicts that housing wealth increases preference for status quo arrangements with respect to Social Security. I contrast the status quo bias hypothesis with the claim that housing wealth reduces support for social insurance, and test the hypothesis in two empirical studies. A survey experiment finds that homeowners informed about high historical home price appreciation (HPA) are about 8 percentage points more likely to prefer existing Social Security arrangements to privatized retirement accounts, compared to those informed about low historical HPA. Observational data from the 2000-2004 ANES panel show that homeowners who experience higher HPA are about 11 percentage points more likely to prefer status quo levels of spending on Social Security than those in the bottom HPA quartile. No significant HPA effects are observed among renters, and for other domains of social insurance among homeowners. The evidence suggests that housing wealth's conservatizing effect should be interpreted as a status quo preference, rather than opposition to redistributive social policies.