Four Essays in Public Economics

Abstract

In recent years, the political debate in Germany has been increasingly shaped by public opinion on key policy areas such as taxation, social security, education, and immigration. Understanding how policy preferences are formed and influenced is crucial for policymakers, researchers, and the general public. This dissertation aims to contribute to this understanding by examining the determinants of policy preferences across different domains. By utilizing a combination of representative population surveys, experimental designs, and advanced econometric methods, this research comprehensively analyzes how information and individual characteristics shape preferences for tax, social, and migration policies. In four interconnected research articles, this dissertation highlights the specific mechanisms underlying preference formation in each policy area and offers broader insights into the dynamics of public opinion and its implications for democratic governance in Germany. By addressing these themes, the dissertation connects its projects into a coherent narrative that underscores the importance of informed and responsive policymaking in a diverse and evolving society. This dissertation consists of four independent research articles. In Chapter 1, my co-authors Luna Bellani, Kattalina Berriochoa, Guido Schwerdt and I study attitudes towards inheritance taxation in Germany. While rising income and wealth inequality are broadly perceived as problematic, public attitudes toward tax reforms remain ambivalent. This study examines the role of information in shaping public opinion. Utilizing a novel survey experiment, we investigate how simple information about a complex tax policy can reshape public attitudes toward tax reforms. Our findings reveal that inheritance taxation is widely unpopular, with a majority of respondents lacking a complete understanding of the tax. Our treatment provides information about the amount of inheritance exempt from taxation. This information significantly increases public support for inheritance taxation, shifting from a relative majority favoring abolition to a relative majority supporting the tax. Further analysis indicates that this effect is primarily driven by changes in individuals' expectations of being personally impacted by the tax. In contrast, information highlighting the increasing proportion of inherited wealth only negligibly affects policy demand. Our results suggest that pocketbook motives and misinformation may contribute to explaining the paradox of limited demand for inheritance taxation despite growing inequality concerns. In Chapter 2, my co-authors Christian Breunig, Friedrich Breyer, Guido Schwerdt, Maj-Britt Sterba and I study preferences for redistribution in the German pension system. Citizens and politicians rely on their knowledge of a pension system when forming their preferences and evaluating its fairness. We conduct a randomized experiment in a representative opinion survey of the German adult population complemented by a study of elected politicians. Using Germany's proportional pension contribution scheme, we embed an information provision experiment in our citizen and politician survey. We find that voters and politicians adjust their perceptions and preferences when new information becomes available. Information on the proportional character of the pension system increases perceived fairness and decreases redistributive demands. In contrast, information about inequalities in life expectancy between beneficiary groups lowers perceived fairness and increases demand for redistribution. Both citizens and politicians reject the strict proportionality between lifetime contributions and pension benefits in favor of more redistribution from high to low earners in the retirement phase. In Chapter 3, the focus shifts to preference formation on education policy. Here, I investigate the malleability of ideological influence on policy preferences for tuition at public universities. Building on the data foundation from Chapter 2, I conduct an information provision experiment with the German adult population. The experiment reveals that social information significantly attenuates the impact of ideology, narrowing the preference gap among left-leaning, moderate, and conservative respondents. In contrast, structural information shows limited influence. The findings emphasize the significance of social environments in shaping policy preferences and prompt considerations for crafting effective political campaigns. The findings improve our understanding of ideological dynamics and help to develop strategies for navigating polarized public opinions. Chapters 1 to 3 look at policy preferences through the lens of survey data. Chapter chap_4 goes beyond this perspective and looks at voters' decisions at the ballot box. The chapter examines how immigration to Germany affects voting for two German parties at opposite ends of the political spectrum: the center-left Bündnis 90/Die Grünen (Greens) and the right-wing Alternative for Germany (AfD). I apply a twofold empirical approach combining a fixed effects estimation and an instrumental variables (IV) approach to county-level data on federal election outcomes and the foreign population. My analyses suggest that immigration and electoral support for the Greens and the AfD are, on the aggregate, not systematically related. Examining the heterogeneity of the effects reveals insightful patterns along the urban-rural divide, local unemployment, and local housing availability.