Does the Broad Public Want to Consolidate Public Debt? – The Role of Fairness and of Policy Credibility

Authors

  • Helmut Stix

    1. Economic Studies Division, Oesterreichische Nationalbank, Vienna, Austria
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    • I would like to thank an anonymous reviewer as well as Pirmin Fessler, Walpurga Köhler-Töglhofer, Markus Knell, Lukas Reiss and Josef Zuckerstätter for helpful comments. The views expressed are those of the author and do not necessarily reflect those of the Oesterreichische Nationalbank.

Summary

This paper employs information obtained from a public opinion survey to analyze why voters differ in their demand for fiscal consolidation, i.e. why some voters support and others oppose a reduction of public debt levels. Results demonstrate that preferences for consolidation vary considerably across individuals along economically informed dimensions. First, voters behave rationally in the sense that self-interest matters. Second, voters care for their children (but this motive seems less important than one might presume). Third, voters care strongly for how the consolidation burden is distributed among the current generation – this is at least as important as the intergenerational aspect. Forth, the lack of credibility of fiscal policy plans is a serious impediment to voters' support for consolidation. These results imply that fiscal consolidation plans should be “fair” and that the imposition of credible fiscal policy rules could increase voters' support of consolidations.

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