POLICY FEEDBACK EFFECTS OR RATIONAL CHOICE? Social policy preferences of informal and formal sector workers in Latin America

Abstract: This thesis aims to investigate how informal and formal sector workers in Latin America form their social policy preferences. I contribute to the already existing literature by introducing a new perspective that combines two theoretical approaches. Fist, an institutionalist approach expects that already established policies affect the social policy preferences through feedback effects. Therefore, I examine how the degree of privatization affects the policy preferences of informal and formal sector workers. Since many of these social policies have been promoted by external actors, this thesis can contribute to the understanding of feedback effects that are confronted with the problem of endogeneity. The second theoretical approach introduces a rational choice perspective which suggests that individuals rationally evaluate the collective action problem of publicly funded welfare states and consequently weigh up public versus private services. In order to test my theoretical assumptions, I obtain data from the Latinobarómetro 2008 that offers 19,105 respondents in 18 Latin American countries. The methodological approach involves a mixed-effects multi-level model that accounts for cross-country variation. The decision to choose this model is mainly motivated the fact that individual-level interactions are affected by country-specific factors on the macro-levels. The empirical results do not confirm the causal prediction of my hypotheses. The insignificant results imply that institutional factors might not affect the social policy preferences of informal and formal sector workers. Instead they support the claim that exogenously promoted policies do not cause feedback mechanisms on individual preferences.