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

Authors – Martin Ardanaz, Evelyne Hübscher, Philip Keefer, Thomas Sattler.

Abstract :

Why do individuals’ preferences for redistribution 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: individuals’ misperceptions regarding the incidence of current taxes. Treated respondents who are informed that the Value-Added Tax (VAT) is regressive are significantly more likely to prefer progressive tax reforms. Treatment effects are driven by the large fraction of respondents who underestimate the regressivity of the VAT. They are disproportionately right-leaning and more likely to attribute success to individual effort than luck; 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.