Decision-Making Under Social Pressure: The Political Economy of Debating Socially Sensitive Issues

Abstract

Policy-makers often rely on public opinion polls to decide which political projects to pursue. We study how the use of opinion polls influences policy outcomes if respondents feel pressured to offer "socially desirable" views when answering the pollster's questions. Our results indicate that this type of social pressure leads to second-best policy outcomes even if politicians are aware of the bias. The context for the empirical part of our study is the siting of a radioactive waste repository in Pennsylvania. We model the local politicians' decision to support this facility as guided by economic concerns and by social pressure. We find that social pressure is critical for an explanation of local policy-making.

JEL Classification: D72, D78, H7