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Beliefs about Public Debt and the Demand for Government Spending

Christopher Roth, Sonja Settele and Johannes Wohlfart

No 8087, CESifo Working Paper Series from CESifo Group Munich

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.

Keywords: government debt; political attitudes; beliefs; expectations; information (search for similar items in EconPapers)
JEL-codes: P16 E60 Z13 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-mac
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