An Economic Interpretation of Voting Behaviour on Public Finance Issues

Abstract

SUMMARY In this paper the voting behaviour on public finance issues is examined. The authors presuppose that individuals do reveal their true preferences in referenda and that, therefore, it is possible to explain their underlying utility calculus. For this purpose different cost concepts are introduced: (1) private opportunity costs (benefits from alternative private expenditures), (2) public opportunity costs (benefits from alternative public expenditures), and (3) expected tax increases. Having analyzed theoretically the weight these different cost categories have in the utility calculus of the voters of different income classes, the determinants of the utility of public projects are examined. The results of this theoretical reasoning are tested empirically in the last part of the paper by using poll‐data from the canton Basel‐Stadt (Switzerland). On the whole the empirical tests confirm the derived hypotheses.

The rational voter: an analysis of two Atlanta referenda on rapid transit

“…Our hypothesis was that if the sales tax is thought to be less regressive than the property tax, higher income individuals would be less inclined to vote for the system when the method of financing is a sales tax than when it is a property tax. A similar result is obtained by Frey and Kohn (1972) in their analysis of eighteen referenda held in Basel-Standt, a Swiss canton.…”

“…This paper analyzes, within the framework of the rational voter model, the outcomes of the two public transit referenda held in Atlanta. The objectives of the paper are to provide a test of the rational voter hypothesis and to provide insights into voter preferences for public mass transit.Previous tests of the rational voter model have analyzed results of referenda on public works projects, Dildine (1972) and Frey and Kohn (1972); votes on tax or finance issues, Smith (1975); and voter turnout, Silberman and Durden (1975), Settle andAbrams (1976), and Barzel and Silberberg (1973).Although several referenda on mass transit issues have been held, there has been little economic analysis of the voting patterns in these referenda. …”

“…Previous tests of the rational voter model have analyzed results of referenda on public works projects, Dildine (1972) and Frey and Kohn (1972); votes on tax or finance issues, Smith (1975); and voter turnout, Silberman and Durden (1975), Settle andAbrams (1976), and Barzel and Silberberg (1973).…”

Contingent Valuation and Collective Choice

“…This could affect the perception of the tax price. Second, voting choices may reflect the opportunity costs of a forgone alternative service, not WTP for the public good (Frey 1970). This is relevant in cases where a government's revenues are constrained below or above what optimal (or equilibrium) provision would require.…”

Demand functions and the valuation of public goods

“…Recognizing these advantages, several studies of referenda on public finance issues were undertaken, but they involved a limited number of issues only and restricted themselves to statewide referenda Birdsall, 1965). And where more specific and local issues were analyzed, the studies are not concerned with demand functions but with the correlations of income with approval rates (Wilson and Banfield, 1965;Frey and Kohn, 1970).…”