Policy Misperceptions, Information, and the Demand for Redistributive Tax Reform: Experimental Evidence from Latin American Countries

50 Pages Posted: 11 Jan 2023

See all articles by Martin Ardanaz

Martin Ardanaz

Inter-American Development Bank

Evelyne Huebscher

CEU - School of Public Policy; University of Geneva - Department of Political Science and International Relations

Philip Keefer

Inter-American Development Bank

Thomas Sattler

University of Geneva - Department of Political Science and International Relations

Date Written: December 20, 2022

Abstract

Why do individuals’ preferences for redistribution often diverge widely from their material self-interest? Using an original online survey experiment spanning eight countries and 12,000 respondents across Latin America, one of the most unequal regions in the world, we find significant evidence for an under-explored explanation: misconceptions regarding the distributional effects of current tax policy. Treated respondents who are informed that an increase in the value added tax (VAT) is regressive are significantly more likely to prefer policy reforms that make the tax more progressive. Treatment effects are driven by the large fraction of respondents who underestimate the regressivity of the VAT, even though their misperceptions are linked to fundamental views about the world. These respondents are disproportionately right-leaning and more likely to attribute success to individual effort than luck. Despite the deep-rooted nature of respondents’ misperceptions, treatment effects are largest among individuals who hold these views of the world. These findings contribute both to understanding the political economy of redistribution and the potential for information interventions to shift support for fiscal adjustment policies protecting the most vulnerable.

Keywords: Taxes, redistribution, survey experiment

JEL Classification: D72, D90, H20, H30

Suggested Citation

Ardanaz, Martin and Huebscher, Evelyne and Keefer, Philip and Sattler, Thomas, Policy Misperceptions, Information, and the Demand for Redistributive Tax Reform: Experimental Evidence from Latin American Countries (December 20, 2022). Available at SSRN: https://ssrn.com/abstract=4321786 or http://dx.doi.org/10.2139/ssrn.4321786

Martin Ardanaz

Inter-American Development Bank ( email )

Evelyne Huebscher

CEU - School of Public Policy ( email )

Nador utca 9
Budapest, H-1051
Hungary

University of Geneva - Department of Political Science and International Relations ( email )

40 boulevard du Pont d'Arve
Genève 4, CH-1211
Switzerland

Philip Keefer (Contact Author)

Inter-American Development Bank ( email )

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

Thomas Sattler

University of Geneva - Department of Political Science and International Relations ( email )

40 boulevard du Pont d'Arve
Genève 4, Geneve CH-1211
Switzerland

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

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