Periodic Reporting for period 2 - MIDEBT (The Micro-foundations of Debt Crises)
Periodo di rendicontazione: 2021-12-01 al 2023-05-31
Thus, we have many competing theories, many of which of impossible to test with observational data, that are built on an untested assumption about citizen preferences. This project aims to test these assumptions and create new insights into what drives citizens' preferences toward sovereign debt consolidation. Only after understanding what drives citizens’ behavior towards debt consolidation can we then assess existing theories or build new theories to understand why some countries experience sovereign debt distress and debt crises while others are able to manage their finances.
Answering this question is important for several reasons. Sovereign debt crises are responsible for large amounts of human suffering and pain. Like war, debt crises are often not unexpected but still seem unavoidable. By understanding what forces shape these slow-moving crises we can hopefully design interventions to prevent them or minimize their social externalities.
The project has four related objectives:
1) To test and develop new theories about why some individuals are reluctant to accept consolidation today to avoid future debt crises.
2) Examine how individual preferences influence national-level debt policy
3) Examine how bond traders assess public opinion in their decisions to hold or sell sovereign bonds.
We have also tested the common narrative that cultural differences explain the different fiscal politics of northern “saints” and southern “sinners within the European Union. This popular narrative is common in both academic circles and the press. Like many cultural narratives, it has never been tested. In our test, using over 200,000 survey responses, we find no evidence that northern and southern Europeans have different attitudes toward public debt. This suggests that the divergent outcomes are driven more by structural macroeconomic factors and institutions than cultural differences.
Aspide, Alessia, Kathleen J. Brown, Matthew DiGiuseppe, and Alexander Slaski. "Culture & European attitudes on public debt." New Political Economy (2022): 1-17.
Aspide, Alessia, Kathleen J. Brown, Matthew DiGiuseppe, and Alexander Slaski. "Age and support for public debt reduction." European Journal of Political Research (2021).