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Beliefs About Public Debt and the Demand for Government Spending

Author

Listed:
  • Christopher Roth

    (Department of Economics, University of Warwick)

  • Sonja Settele

    (CEBI, Department of Economics, University of Copenhagen)

  • Johannes Wohlfart

    (CEBI, Department of Economics, University of Copenhagen)

Abstract

We 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, we run a series of experiments in which we provide half of our respondents with information about the debt-to-GDP ratio in the US. Based on a total of more than 4,000 respondents, we find that most people 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.

Suggested Citation

  • Christopher Roth & Sonja Settele & Johannes Wohlfart, 2020. "Beliefs About Public Debt and the Demand for Government Spending," CEBI working paper series 20-05, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2005
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    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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