Demand-Side Determinants of Public Spending Allocations: Voter Trust, Risk and Time Preferences

95 Pages Posted: 10 Jun 2020 Last revised: 28 Sep 2021

See all articles by Philip Keefer

Philip Keefer

Inter-American Development Bank

Carlos Scartascini

Research Department - Inter-American Development Bank (IDB)

Razvan Vlaicu

Inter-American Development Bank; University of Maryland

Date Written: April 16, 2020

Abstract

We examine whether public spending misallocations may reflect voter demand factors such as political and interpersonal trust or risk and time preferences. A model of optimal choice under public spending tradeoffs provides individual-level testable hypotheses. The data come from an original survey that offered voters in seven Latin American countries binary choices between public spending options in education and security. Respondents reporting higher mistrust or impatience are more likely to choose transfers over public goods; more impatient respondents are also more likely to choose short-term spending over public investment. Within public goods, however, political mistrust and risk aversion can shift voter demand from current to investment spending. Randomized experiments providing information about the benefits of public investment have the expected average demand impacts, while respondents with high political mistrust or impatience show attenuated treatment effects.

Keywords: trust, risk preferences, time preferences, transfers, public goods, public investment

JEL Classification: D72, H20, H50, O10

Suggested Citation

Keefer, Philip and Scartascini, Carlos G. and Vlaicu, Razvan, Demand-Side Determinants of Public Spending Allocations: Voter Trust, Risk and Time Preferences (April 16, 2020). Available at SSRN: https://ssrn.com/abstract=3581006 or http://dx.doi.org/10.2139/ssrn.3581006

Philip Keefer

Inter-American Development Bank ( email )

1300 New York Ave., NW
Washington, DC 20577
United States
202-623-1961 (Phone)

Carlos G. Scartascini

Research Department - Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States
2026231963 (Phone)

HOME PAGE: http://www.cscartascini.org

Razvan Vlaicu (Contact Author)

Inter-American Development Bank ( email )

1300 New York Ave NW
Washington, DC 20577
United States

University of Maryland ( email )

3114 Tydings Hall
College Park, MD 20742
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
68
Abstract Views
483
rank
454,269
PlumX Metrics