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Understanding Public Debt Preferences

Friedrich Heinemann () and Tanja Hennighausen

FinanzArchiv: Public Finance Analysis, 2012, vol. 68, issue 4, 406-430

Abstract: Surprisingly little is known about voters´ public debt preferences on a micro level. This is deplorable, given the importance of the fiscal stability culture in the context of the European public debt crisis. This contribution tests, for a self-designed representative German survey, debt preferences and their determinants. Our results indicate that a Ricardian approach has some importance for explaining individual heterogeneity of consolidation preferences -- emphasizing, for example, the importance of individual credit constraints. However, Ricardian reasoning is not able to give a complete picture. Theories of debt determination that point to societal coordination failures or ideology offer additional explanations with empirical backing. The magnitude of these additional effects is substantial; the size of the trust variable is not smaller than the intergenerational dummy for the presence of children.

Keywords: Ricardian equivalence; stability culture; European debt crisis (search for similar items in EconPapers)
JEL-codes: H60 H63 D78 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1628/001522108X659556

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