Recent literature on the dualization of welfare states emphasizes the cleavage between labor market insider and outsiders. In contrast, our paper is more concerned with the analysis of coalition formation in the upper and middle classes. In particular, we are interested in why in some countries, high-income people support the public spending on social services such as education and health care, whereas in others, they oppose such spending. Empirically, the paper performs a multilevel analysis of ISSP survey data on public support for increased government spending for different kinds of social services. We find strong cross-level interaction effects indicating that preferences of high-income people strongly depend on existing institutions, in particular the division of labor between public and private provision. Specifically, the relationship between income and spending preferences depends on the possibilities to opt out of the public system, which are greater in systems where the public share in financing is already low. We further argue that the division of labor between public and private provision is itself a result of coalitions the political arena, and the composition of these coalitions depend on electoral and politico-economic institutions.
