Borrowing to Self-Insure? Credit Access and Support for Welfare

The idea that credit can be a private form of insurance against economic shocks has recently gained credence, but do individuals really see bank credit as an acceptable substitute for social insurance? We conjecture that credit constitutes a viable alternative to social insurance for those with high incomes and those who face low risk from unemployment. Relying on observational data from the European Social Survey between 2002 and 2010 we conclude that individuals with better credit access demand lower levels of redistribution, but we confirm this effect is moderated by income and job loss risk. We then conduct a conjoint analysis in the United Kingdom that also points to a credit-access effect on preferences regarding welfare. Specifically, we find that high-income, low-risk individuals prefer lower income taxation (i.e., a lower fiscal burden) when credit is cheaply available.