16 October 2020

The research paper "Beliefs about Public Debt and the Demand for Government Spending"

by Chris Roth, Sonja Settele and Johannes Wohlfart has been accepted for publication in the Journal of Econometrics.

In the paper they examine how beliefs about the debt-to-GDP ratio affect people's attitudes towards government spending and taxation. Using representative samples of the US population, they run a series of experiments in which they provide half of their respondents with information about the debt-to-GDP ratio in the US. Based on a total of more than 4,000 respondents, they find that most individuals underestimate the debt-to-GDP ratio and reduce their support for government spending once they learn about the actual amount of debt, but do not substantially alter their attitudes towards taxation. The treatment effects seem to operate through changes in expectations about fiscal sustainability and persist in a four-week follow-up. The paper contributes to a literature that uses information experiments to understand the formation of political attitudes, and is one of the first papers to study the role of beliefs about the financing of government spending.

You can read the working paper here