--- title: "Bottom-Up Preferences for Public Debt Reduction and Repayment" authors: ["Matthew DiGiuseppe", "Alessandro Del Ponte"] year: 2023 status: "Working paper (revise & resubmit)" url: "https://www.matthewdigiuseppe.com/papers/bottom-up-preferences-public-debt.md" links: {"PDF on OSF": "https://files.osf.io/v1/resources/wxr67/providers/osfstorage/6558687cf6ce3c224d50514e?action=download&direct&version=1"} full_text: true --- # Bottom-Up Preferences for Public Debt Reduction and Repayment DiGiuseppe, M., & Del Ponte, A. (2023). Bottom-Up Preferences for Public Debt Reduction and Repayment. - Status: Working paper (revise & resubmit) - PDF on OSF: https://files.osf.io/v1/resources/wxr67/providers/osfstorage/6558687cf6ce3c224d50514e?action=download&direct&version=1 - Listed on: https://www.matthewdigiuseppe.com/#research ## Abstract The public places an important constraint on a government’s ability to maintain stable debt burdens and repay sovereign debt in times of crisis. Yet, scholars have only begun to examine how the public reasons about government debt. The nascent literature finds that a mix of ego-tropic reasoning and top-down elite cues inform public attitudes on sovereign debt policy. In this paper, we propose a bottom-up explanation to complement existing theories. We argue that citizens’ preferences over sovereign debt are also driven by their attitudes toward private debt. Drawing from theories and methods from moral psychology, we propose that the link between private and public debt is similar to other folk economic beliefs that conflate how household and government budgets work. To test our argument, we conducted several preregistered studies. In Brazil and Italy, we find observational evidence that private debt attitudes are significantly correlated with citizens’ positions on public debt, and this is in part driven by their self-reported moral convictions. A survey experiment fielded in Italy finds that manipulating attitudes toward private debt changes support for public debt repayment. ## Full text > Extracted automatically from the preprint dated November 18, 2023, then titled "Bottom-Up Sovereign Debt Preferences": https://osf.io/wxr67/. Tables, figures and equations may be garbled or missing; quote the PDF, not this text. **Bottom-Up Sovereign Debt Preferences *** Matthew DiGiuseppe · Alessandro Del Ponte Associate Professor · Assistant Professor Leiden University · University of Alabama November 18, 2023 Abstract The public places an important constraint on a government’s ability to maintain stable debt burdens and repay sovereign debt in times of crisis. Yet, scholars have only begun to examine how the public reasons about government debt. The nascent literature finds that a mix of ego-tropic reasoning and top-down elite cues inform public attitudes on sovereign debt policy. In this paper, we propose a bottom-up explanation to complement existing theories. We argue that citizens’ preferences over sovereign debt are also driven by their attitudes toward private debt. Drawing from theories and methods from moral psychology, we propose that the link between private and public debt is similar to other folk economic beliefs that conflate how household and government budgets work. To test our argument, we conducted several preregistered studies. In Brazil and Italy, we find observational evidence that private debt attitudes are significantly correlated with citizens’ positions on public debt, and this is in part driven by their self-reported moral convictions. A survey experiment fielded in Italy finds that manipulating attitudes toward private debt changes support for public debt repayment. *This research was funded by European Research Council Grant number 852334, The Microfoundations of Debt Crises (MIDEBT) Project. The authors would like to thank Rachel Wellhausen and Thomas Sattler for feedback on earlier drafts and Alessia Aspide, Luma Andrade, and Artur Sanovicz for their research assistance. Political economy scholars have extensively studied citizens’ preferences toward trade and other economic policies (see, for example, Rho and Tomz (2017)). However, we know comparatively little about preferences regarding sovereign debt. It is hard to imagine that this inattention is motivated by the public’s irrelevance. Efforts to consolidate and repay external debt involve distributional conflicts that have consequential impacts on livelihoods, macroeconomic stability, and subsequently on elections and political stability (DiGiuseppe and Shea, 2015; Nelson and Steinberg, 2018; H¨ubscher et al., 2021; Bojar et al., 2022; Biglaiser et al., 2023). The public constraint on fiscal policy and sovereign debt consequently has clear implications for the ability of governments to retain creditworthiness (Ballard-Rosa et al., 2019; Barta and Johnston, 2018) and avoid default. Even the IMF recognizes that building public support for reforms is crucial to avoid debt crises in the face of adverse global conditions (Comelli et al., 2023). Public constraints also matter for the resolution of default and restructuring episodes (DiGiuseppe and Shea, 2019; Ferry, 2023; Connell, 2019) and, ultimately, the ability of the government to invest in its own development or engage in pro-cyclical spending to offset economic, natural, or military crises. Thus far, scholars examining what the public thinks of government debt have done so by focusing on economic preferences during default episodes or in terms of austerity programs aimed at reducing debt. The nascent literature suggests that attitudes over government debt are driven by a mix of “pocketbook” concerns (Curtis, 2014; Curtis et al., 2015) and top-down elite cues (Nelson and Steinberg, 2018; Barnes and Hicks, 2018; Bansak et al., 2021). In this paper, we suggest a bottom-up explanation, based on moral psychology, to complement these existing theories. There is a growing realization that Open Economy Politics (OEP) models of voter preferences, based on material interest, are insufficient to explain public attitudes on economic policy (Guisinger, 2017; Rho and Tomz, 2017; Mutz, 2021; Rickard, 2021). Consequently, scholars have begun to focus on non-material factors, often based on sociological and psychological theories, which better explain these preferences. For example, socio-tropic concerns (Mutz, 2021), concerns about fairness (Brutger and Rathbun, 2021; Stantcheva, 2021), and other non-material folk economic beliefs (Herrmann et al., 2001; Boyer and Petersen, 2018) play an important role in the judgments of citizens of international trade policy. There are good reasons to believe that citizens’ attitudes toward debt are driven by similar non-material factors. Despite its important consequences for every economy, sovereign debt management can be a complex and obscure issue for everyday citizens, who often lack adequate financial literacy (Lusardi and Mitchell, 2014). As such, citizens might rely on basic intuitions about debt to inform their preferences on this topic. In particular, we argue that folk economic beliefs derived from the morality of private debt inform opinions on sovereign debt: the folk economics hypothesis. Debt and morality have been intertwined for millennia. In fact, the anthropologist David Graeber speculates that morality is not only a product of religion or philosophy but also of debt and reciprocity (2011). Further, recent debates about sovereign debt suggest that moral framing looms large in policy debates about indebtedness both in domestic politics (Barnes and Hicks, 2022) and in international politics (Matthijs and McNamara, 2015; Rathbun et al., 2019). Given the strong connection between moral attitudes and private debt, the folk economics hypothesis predicts that there will be a substantial correlation between people’s attitudes toward private or household debt and their attitudes toward sovereign debt reduction and repayment. We also expect that this relationship will be conditioned by the extent to which citizens associate private debt repayment with their fundamental moral convictions (Ryan, 2014): the moral conviction hypothesis. To test our hypotheses, we present evidence from pre-registered observational and experimental studies using representative samples. In Italy and Brazil, we found a significant observational correlation between attitudes toward private and sovereign debt after controlling for important confounders. Notably, we also find that those whose attitudes toward private debt are driven by moral conviction are more likely to support sovereign debt repayment. In a subsequent survey experiment in Italy, we found that manipulating attitudes on the appropriateness of defaulting on private debt moves opinions on sovereign debt default in the same direction. Our findings hold clear relevance for scholars studying the roots of support for debt consolidation through austerity and related attitudes toward sovereign debt repayment. The literature currently provides strong evidence for top-down mechanisms and ego-tropic reasoning (Barnes and Hicks, 2021, 2018; Nelson and Steinberg, 2018; Del Ponte, 2021; Curtis, 2014). Our findings suggest that this is not the entire story. Public opinion on this important policy area is also driven by individuals’ broader, non-material, beliefs about debt. ### The Mass Politics of Sovereign Debt Theory and evidence on the public’s role in sovereign debt management come from three distinct literatures. Public-choice scholars have long assumed, but largely left untested, that the public is ill-informed or uninterested in sovereign debt policy. This has led to theories of fiscal illusion in which politicians are seen as exploiting voter inattention toward their own electoral ends resulting in a deficit bias (Buchanan and Wagner, 1977; Yared, 2019). Similarly, theoretical work in economics and political science has built models around interest groups or politicians’ decisions that make various assumptions about the public’s engagement and interests in deficit reduction and debt repayment (see Alesina and Passalacqua (2016) for a review). Scholars have only recently begun to systematically examine the public’s role in sovereign debt management and repayment. This has largely been conducted by Comparative Political Economy (CPE) researchers focusing on European politics since the Eurozone Crisis and with an explicit focus on austerity. The emerging consensus is that the public often relies on top-down elite cues from the media (Barnes and Hicks, 2018) or politicians (Bansak et al., 2021; Bisgaard and Slothuus, 2018; Del Ponte, 2021) to form opinions on debt consolidation. Notably, Bansak et al. (2021) find that co-partisan cues can increase support for austerity packages by 10-20%. A related debate considers if the public are fiscal conservatives (Bansak et al., 2021) or opposed to austerity (H¨ubscher and Sattler, 2017; H¨ubscher et al., 2021; Bremer and B¨urgisser, 2021) by looking at electoral responses to macroeconomic outcomes or probing public attitudes directly with observational or experimental methods. Given the reliance on elite cues, however, it could be possible that attitudes toward sovereign debt are dynamic (Barnes and Hicks, 2021). Further, alongside elite cues, there is some evidence that the composition of austerity policies falls along ego-tropic expectations as those with higher incomes oppose progressive taxes and those dependent on government spending oppose budget cuts (Bansak et al., 2021). Beyond focusing on already contentious policies aimed at making debt sustainable in the long term, a similar debate exists in the study of mass politics during credit crises when governments are negotiating with external creditors over repayment. Curtis et al. (2015) and Curtis (2014) claim that individual attitudes toward debt resettlement during Iceland’s financial crisis are closely correlated with material interests. This implies citizens’ preferences stemmed from bottom-up ego-tropic interests rather than sociotropic concerns or top-down priming. Tomz finds similar observational evidence of material interest in support for repayment in 2002 Argentina (Tomz, 2004). In contrast, however, Nelson and Steinberg (2018) find evidence that material interests played a minor role in Argentina during a technical default in 2015. Instead, the evidence supports theories of political cueing and symbolism. Opposition to debt repayment correlates more closely with party identification instead of ego-tropic indicators. Like this study, several others have employed framing experiments to explore the role of non-material factors, beyond cueing, as the source of support for debt consolidation and austerity. Yet, these studies have not found much evidence. Bansak et al. (2021) find that framing debates about austerity around morality and ‘common sense’ has little impact on public support. Moreover, both Bansak et al. (2021) and Barnes and Hicks (2022) find that invoking the common household budget analogy has no salient effect on austerity attitudes. At first glance, this last bit of evidence suggests a disconnect between private and public debt in the public’s mind. However, it is unclear if the null results of these studies are simply a product of the public’s familiarity with these common analogies or of the frames’ insufficient persuasiveness. The analogy is so commonly used that it may be ill-suited to framing studies. Importantly, Barnes and Hicks (2022) also find that endorsement of the household analogy correlates with support for a balanced government budget. However, they “find no evidence of causation running from the household analogy to preferences over the government budget [1296].” Instead, they conclude that the association is the product of reverse causation - political preferences drive agreement with the analogy. We continue to examine the relationship by extending our inquiry beyond the household analogy and instead focusing on a broader connection between private and public debt based on evolutionary psychology.[^1] ### Bottom Up Debt Preferences #### The origins of intuitions about debt Even before their personal experience with private and or interest in public debt, people’s intuitions about debt are shaped by basic features of human psychology such as instincts about property rights (Wilson, 2020), fairness (Brosnan and de Waal, 2014), and deservingness (Petersen, 2015). Previous work found that everyday people have clear moral intuitions about right or wrong in property rights disputes (DeScioli and Wilson, 2011; DeScioli and Karpoff, 2015; DeScioli et al., 2017) although experience with these kinds of disputes is infrequent outside the practice of the law. Yet, people are surprisingly talented at making clear judgments about property rights disputes, likely because the task of adjudicating between what is mine from thine has occupied humans since our evolutionary past, resulting in considerable refinement (Wilson, 2020). For example, people remember the owners of an object better than people who are unrelated to an object, indicating that people have a special ability to remember people’s property rights (DeScioli and Karpoff, 2015). Since disputes about debt are ultimately disputes about fundamental issues such as property, fairness, and deservingness, we should expect people to have basic moral intuitions about debt. Even without personal experience with debt, questions about (1) who owns what; (2) were the creditor and the debtor fair to each other; and (3) does the borrower deserve leniency if they are unable to repay titillate basic intuitions about right or wrong. These intuitions can give rise to folk economic beliefs about debt in the modern economy. In modern economies, we can expect people’s intuitions about private debt to be especially meaningful. People engage with credit markets starting in early adulthood if not younger. Because credit markets are a fundamental part of any economy, most adults face an incentive to form opinions about debt (Graeber, 2011), even if they often do not fully understand the mechanics of it (Lusardi and Mitchell, 2014). They must form opinions of sustainable levels of debt, when is appropriate to take on debt and at what interest, what are the consequences of too much debt, and from whom they should borrow. Public debt is something that most citizens encounter less frequently. The issue has varying salience in most countries and tends to enter national conversations during periodic budgeting processes or in times of economic strain. This gap between familiarity with private and public debt presents an opportunity for individuals to draw on their attitudes toward private debt to inform their political attitudes toward government debt. #### Folk economic beliefs about public debt The psychology of folk economic beliefs helps us understand how people draw inferences from the domain of household and business economics to the larger, and different, domain of macroeconomic policy. Folk economic beliefs are “widespread, culturally transmitted, explicitly held reflective beliefs about economic processes (Boyer and Petersen, 2018, 41).” They can simply be understood as cultural beliefs that deviate from economic self-interested behavior. Theories about the origin of folk economic beliefs suggest that people’s intuitions about economic life stem from evolved adaptations to solving domain-specific issues. For example, the need to detect and punish cheaters in free-riding was necessary in early human societies to manage collective resources and ensure group survival. Today, such intuition has a strong impact on support for welfare states. As Aarøe and Petersen (2014) demonstrate, government social support is highly conditional on framing recipients as deserving or undeserving in line with cheater detection intuitions. We posit that attitudes toward public debt policies follow a similar logic. The reason is that in ancestral societies, public debt did not exist. Hence, when people express moral attitudes about public debt, they likely draw on psychological algorithms that evolved in societies where the relationships between creditors and debtors involved individuals or small groups (e.g., households or small tribes of hunter-gatherers). In most cultures, private debt is seen through a prism of morality that cuts both ways (Gregory, 2012; Graeber, 2011). Usury is viewed as wrong and seen as exploiting the poor and uninformed. But once a debt has been accumulated, defaulting is also perceived as morally wrong or even taboo, as one is reneging on the promise to repay. Beyond anthropological claims, observational and experimental evidence confirms the power of values in modern private debt markets. Notably, Guiso et al. (2013) find that 83% of people think strategically defaulting on a mortgage is morally wrong but permissible when banks treat borrowers unfairly. In other evidence, Chin et al. (2019) find that citizens assign a social stigma to bankruptcy that is driven largely by moral concerns and the stigma is stronger when borrowers have personal agency over bankruptcy decisions. Even among US business owners attuned to bankruptcy’s financial incentives, 25% believe defaulting to be unethical (Bernstein et al., 2023). Bursztyn et al. (2019) show that moral and religious framing of repayment in Indonesia can increase repayment on actual delinquent debts in an experimental study. Research also shows that credit market behavior correlates with family upbringing and cultural norms even after considering economic circumstances (Almenberg et al., 2021; Davidson and Pirinsky, 2019). These moral economic beliefs inform private economic life, but they are also likely to extend to ideas about how the political macroeconomy functions, since mass-scale economies are a novel element that was absent in our evolutionary relevant environment. These powerful intuitions rooted in our evolutionary past create the building blocks for common misconceptions about economic policy at large. This is demonstrated in other economic policy domains. For example, a common folk economic belief is that market transactions between individuals and businesses are zero-sum (Boyer and Petersen, 2018; Johnson et al., 2022). Research indicates that this belief shapes individuals’ perceptions and support for international trade. Despite a common conception among economists that trade generally increases the welfare of both parties, the public still sees gains by a trading partner as evidence of a loss on the part of their country (Herrmann et al., 2001; DiGiuseppe and Kleinberg, 2019; Mutz, 2021). Beyond trade, similar folk economic beliefs can motivate attitudes toward fiscal policy. Several studies have shown that people often bring their intuitive understanding of fairness to decisions over taxes (Ballard-Rosa et al., 2017; Stantcheva, 2021). In regard to public debt, there is already some evidence that preferences are characterized by folk economic and moral beliefs. Most notably, discourse about asymmetric public debts among Eurozone countries during the European debt crisis was characterized by moralizing about ‘sinners and saints’ (Matthijs and McNamara, 2015). In fact, research shows that values and moral foundations correlate with public opinion regarding policies to lend money or ‘bailout’ countries during the crisis (Rathbun et al., 2019). Little research thus far, however, has shown how individual judgments on private debt, moral or otherwise, influence support for fiscal consolidation and debt repayment by their own government. Beyond the work of Barnes and Hicks (2022) and Bansak et al. (2021) noted above, the closest attempt is provided by Del Ponte and DeScioli (2022), who provide evidence that defaulting on government debt has characteristics of a moral taboo for the American public. However, they do not study attitudes toward private debt, leaving any links between the morality of private and public debt attitudes untested. When individuals are given the opportunity to weigh in and cast ballots on macroeconomic debates about the size of the deficit, the need for fiscal consolidation, decisions to finance public spending with debt, or, in rare cases, the decision to default on sovereign debt, we posit that they are likely to draw on their intuitions about private debt. Private debt provides the closest analogy to sovereign debt since intuitions about debt between individuals have deep ancestral roots in the psychology of property rights (Stake, 2004; DeScioli and Wilson, 2011; Wilson, 2020). Based on this argument, we expect that individuals who consider or are primed to think of repayment of personal debt as a moral obligation are more likely to support a) national austerity policies and b) more willing to prioritize repayment to creditors over domestic fiscal transfers. As we mentioned, debt also invokes strong feelings that many people associate with moral decisions of right and wrong beyond providing a general intuition. Thus, we also examine whether attitudes towards public debt policies differ among people who see private debt decisions in moral terms. To examine if attitudes about private debt influence opinions on public debt policy, we describe below preregistered observational and experimental studies. ### Observational Study Our observational study has two goals. The first is to establish a correlation between private and public debt attitudes, absent confounding from several key factors. This leads to a straightforward hypothesis that tests for a correlation between the two attitudes. Hypothesis 1. Folk economic hypothesis: Individual attitudes toward private debt are positively correlated with attitudes toward public debt reduction and repayment. Our second goal is to examine if this correlation is partially due to moral convictions. As we mentioned above, moral conviction on debt cuts two ways. Respondents may view repaying debts as a moral obligation or they may view creditors as behaving immorally. In the latter case, defaulting on debt may be viewed as morally correct. To assess the nature of moral conviction, we examine a conditional relationship upon which moral conviction is conditional on the permissiveness of defaulting on private debt. Hypothesis 2. Moral conviction hypothesis: Moral conviction will be positively (negatively) correlated with public debt reduction/repayment among those who think it is important (unimportant) to repay private debts. Both of the hypotheses and the empirical specifications used to assess them are preregistered prior to data collection. A copy of our pre-analysis plan can be found in the Supplementary Appendix. #### Samples We test our observational hypotheses in Brazil and Italy. In both countries, we target a sample that is representative of the population by age, sex, region, and education.[^2] Both countries have a reasonable expectation of experiencing future debt crises and further debt sustainability problems. This provides citizens with a motivation to form opinions on debt policy and, subsequently, presents a more difficult test for our hypotheses. Compared to low-debt countries, the public should be more informed about public debt issues, exposed to diverse public narratives, and less dependent on personal attitudes. Although Brazil has not experienced a sovereign default since the 1980s, its public finances rest on shaky ground, as the debt/GDP ratio has almost doubled in the first two decades of the 2000s and is high relative to countries of similar development. Italy amassed large legacy debts in the 1970s and 1980s that it has found hard to reduce despite bouts of austerity. These high public debts have been a greater concern since the Eurozone debt crisis when it became clear that a common currency would make it difficult to adjust in times of crisis. Debt concerns have only increased since the COVID-19 pandemic. While efforts by the European Central Bank have relaxed concerns about the marketability of the country’s sovereign debt issuances, it remains unclear if such arrangements will persist in the future if the debt trajectory isn’t altered. Next, by relying on one advanced industrialized and one emerging market state, we can potentially demonstrate the persistence of the relationship across different socio-economic and educational environments. It is also important to note that the two countries have radically different welfare systems: in Italy, the national healthcare system and generous welfare provide a robust safety net. In Brazil, the welfare state is much smaller, as indicated by the widespread increase in poverty rates amid the COVID-19 pandemic.[^3] These differences in welfare states allow us to examine individual attitudes about sovereign debt in a context where the consequences of tightening public budgets mean plunging numerous families into dire welfare consequences (Brazil) or make a comparatively smaller dent into public welfare (Italy). In all, the differences between the countries should provide greater external validity to any consistent relationship we uncover in the data. #### Independent Variables Measuring attitudes toward debt is challenging. In principle, it is desirable to be both debt-free and to repay debts. However, being debt-free and repaying debts usually comes with trade-offs and sacrifices, such as lower spending. Capturing these tradeoffs in survey items without creating double-barreled questions that introduce bias by asking about two concepts at once can be difficult (Leech, 2002). Another approach is to measure willingness to engage with hypothetical financial products (Caetano et al., 2019). However, this approach requires that respondents have similar baseline economic situations and are interested in similar products (such as student loans). Given, that we are interested in general population attitudes, a context-specific approach is not feasible. To address these measurement challenges, we develop a novel method to elicit private debt preferences that leverages salient trade-offs in decisions to repay debt and holds context constant. We ask respondents to reflect on the situation of a family that has to make sacrifices to repay debts. Asking about a decision that others should make has been demonstrated to reduce desirability bias (Fisher, 1993) that we mentioned above. Asking about trade-offs avoids a costless preference against debt. Table 1 presents the vignettes that reflect the context of each individual country. In Italy, given a robust public and private social safety net, we highlighted giving up basic utilities and the social stigma of drawing on charity to eat. Importantly, this was during a time of high natural gas prices and fielded during the winter. In Brazil, we highlighted the inability to afford medicine and the unfortunate reality of food scarcity. Following the vignettes, we ask respondents what they thought the family should do in a binary choice: ”What do you think the Rossi/Souza family should do?” with response options Repay the loan and Default on the loan. We then asked them to rate the importance of repaying the loan on a 4 or 5-point scale (“How important do you think it is for the Rossi/Souza family to pay back their loan?” [Not at all important/Slightly important/Very important/Extremely important]). This scale is our primary measure of individual-level private debt attitudes. As we mentioned above, evidence for folk economic beliefs is motivated by the moral associations with debt in many cultures. As such, we are particularly interested in how moral attitudes toward private debt inform public debt repayment and reduction. To isolate the moral conviction behind debt attitudes in Hypothesis 2, we draw on the work of Ryan (2017). In a study of the role of moral conviction on compromise, Ryan (2017) uses a two-question battery first used by Skitka (2010) to measure conviction. To rule out the possibility that personal relevance may confound moral conviction, he uses two additional questions aimed to capture the degree by which an issue is personal to the respondent. We follow this same strategy by creating two variables from these four questions: moral conviction and personal relevance. Like Ryan (2017), we also included a folded scale of private debt importance (our primary IV) to control for the fact moral conviction may be picking up attitude extremity. The moral conviction and personal relevance batteries are as follows: “To what extent does your response regarding the Rossi family stem from your fundamental beliefs about what is right and wrong? [Not at all - Very much]” ; “To what extent is your Table 1: Observational Study Vignettes Italy: The Rossi are a family of four who live in a small town not far away. A few years ago, the Rossi family found themselves in dire financial straits and had to take out a 100,000-euro loan from the credit union near their home. At the time, the Rossi family promised to repay the debt in ten years. Now, a few years later, the Rossi family is in further economic hardship and can no longer pay the loan installment. After cutting all possible expenses, the Rossi family is left with only one way to pay off the loan installment: going to eat at Caritas, so as to save on food expenses, and keeping the heating off, to save on the gas bill. If they go to eat at Caritas, all the neighbors will know about it and start talking trash about them. Without heating, it will be a long, cold winter for the Rossi family. Brazil: The Souzas are a family of four who live in a small town not far away. A few years ago, the Souzas found themselves in dire financial straits and had to take out a 50000 real loan from the credit union near their home. At the time, the Souza family promised to repay the debt in ten years. Now, a few years later, the Souza family is in further economic hardship and can no longer pay the loan installment. After cutting all possible expenses, the Souzas are left with only one way to pay off the loan installment: They have to forgo important medicines for the mother and cut back their meals from three to one meal a day. If they forgo the medicine, the mother’s health will decline and will suffer permanent damage. If the family doesn’t eat, this will impact the health of the children and interfere with their ability to learn. In this difficult situation, the Souzas are pondering what to do: repay the debt at the cost of their health and well-being; or refuse to pay, thus maintaining their health and well-being. answer regarding the Rossi family a reflection of your core moral beliefs and convictions? [Not at all - Very much]”; “How much can you relate to the story of the Rossi? [Not at all - Very much]”; “Have you ever had to make a decision like the Rossi family? [Never - Always]” #### Dependent Variables We examine two dependent variables that aim to capture salient policy decisions around public debt: reduction and repayment. Importantly, work by Del Ponte and DeScioli (2022) shows that repayment of debt has characteristics of a moral taboo. No work, however, has established that future-looking avoidance of debt reduction in the form of austerity has similar characteristics. As such, we ask about both debt reduction and debt repayment to allow us to distinguish if private debt attitudes and morality are relevant for both the management and repayment of sovereign debt or simply the latter. This allows us to consider a wider range of outcomes but also speak to two distinct literatures on austerity and default that have much in common. Like our measure of household debt preferences, our dependent variable also considers trade-offs in sovereign debt outcomes. Bremer and B¨urgisser (2021) note that preferences for sovereign debt reduction are highly conditional on whether trade-offs are invoked and the method of reducing deficits (taxes or spending). We build on this approach and ask three questions for both public debt reduction and three questions about sovereign debt repayment (assuming a crisis in the future). We first ask about reduction without mentioning taxes or spending cuts. We then ask about reduction even if it requires tax increases or, in another question, substituting spending cuts.[^4] After asking about debt reduction, we ask about support for sovereign debt repayment. Respondents first read the following passage: “Given the impending maturity of the public debt installment, the government must make a decision. It can pay the debt installment or not repay it, thus sending Italy into default. If Italy goes into default, the government will have more money for Italians in the immediate term, but it will jeopardize its ability to borrow money in the future. If Italy instead pays off the loan installment, the government will have to raise taxes and cut welfare.” We then ask about support for repayment with three questions with the same progression of no trade-off mentioned, taxes and spending cuts. Each question asks respondents how strongly they agree with a statement (e.g., The government should reduce the debt, even if that implies lower government spending.). We then average the three questions creating two measures: debt reduction support and repayment support. Those who prefer reduction/repayment regardless of the trade-off will be ranked highest on the scale, those who oppose reduction/repayment even with no trade-offs will be placed lowest on the scale. Before answering these questions, we provided context about the size of government debt and the consequences of high debt (see Supplementary Appendix). Figure 1 presents the mean value on a normalized scale for each of the component parts for reduction and repayment in both countries. The distribution is consistent with Bremer and B¨urgisser (2021) who find support is lowest when debt reduction requires taxation. Lastly, we ask another outcome question to link repayment to political accountability more directly. We ask about the degree of punishment the government should receive from electoral or international sanctions if they fail to repay the debt in the event of a crisis. The original scale is 1 (none) - 4 (a lot), which is then normalized. We share concerns raised by Barnes and Hicks (2022) that question order may drive findings: asking about sovereign debt may prime responses on private debt. As such, we randomized the order of the private and sovereign debt modules. We also include a distractor module and demographic questions between these modules to reduce priming effects. We Figure 1: Support for Public Debt Reduction and Repayment Under 3 Conditions The figure shows the mean (on a scale of 0-1) and standard error for each of the three questions used to construct our primary dependent variable: support for reducing the national debt with spending cuts, without mentioning costs and with taxes. find no evidence that order effects are driving the results we present below.[^5] #### Covariates We include several theoretically informed covariates to address confounding. Notably, we include multiple variables to isolate confounding from partisan or ideological effects given the relevance of co-partisan cues. We first control for party vote in the previous election. Next, we control for left-right partisanship on an 11-point scale and its square to account for potential non-linearities. Lastly, we include an approval scale of the current executive (Meloni/da Silva). We also consider the relationship might be confounded by income and debt market exposure. We thus include binary indicators for 10-levels of wealth given income shapes the risk of and comfort with debt. Following Curtis et al. (2015) and Nelson and Steinberg (2018), we control for personal debt stock (% of income), plans to borrow in the coming year, investments in domestic or international assets, employment status (employed, retired, unemployed, student) and public employment. Each should correspond to ego-tropic motives to oppose or support the prioritization of public debt over current fiscal priorities and relate to concerns regarding private debt. Next, some individuals may have a better understanding of finance that informs their practical or moral concern for both private and sovereign debt. First, we control for education with dummy variables for each level coded. To address financial knowledge directly, we include seven questions from a well-established financial literacy survey (Lusardi and Mitchell, 2014) and include dummies for the count of questions that each respondent answered correctly (0-7) (see Supplementary Appendix). We also control for age and its squared terms given the findings of non-linear relationship by Aspide et al. (2021) and that age shapes private credit market incentives. Lastly, we control for regional and gender differences. Summary statistics are available in the Supplementary Appendix. #### Observational Study Findings Figure 2 presents the coefficients and confidence intervals of private debt repayment importance from 8 OLS models from the two samples. The models estimate either the preference for debt reduction, debt repayment, or the willingness to punish a politician who defaults on debt. The models include either a bivariate regression or the full set of covariates discussed above. In each model, we see that the importance respondents placed on repaying debts in the fictional vignette has a significant correlation with each of the outcomes, supporting the folk economics hypothesis. Note that the independent and dependent variables are scaled 0-1. The difference between the minimum and the maximum on the private debt scale is associated with a 0.09 and 0.17 increase on the public debt scales with all covariates included. This is a 50% and 93% of a standard deviation difference. In comparison, a full-scale difference in the Left-Right scale is associated with a 43% of one standard deviation change in public debt reduction support.[^6] ##### Robustness and Sensitivity The private debt importance variable is highly skewed toward repayment in both countries. To make sure our findings are not being driven by a small number of respondents on the lower end of the scale, we included the private debt importance variable as a categorical variable in models reported in the Supplementary Appendix. We find that there is a statistically significant difference between the top two categories (important and very important) with both outcomes and in both countries. The difference between these categories is associated with a 21% of one standard deviation difference in the dependent variable. We have done our best to measure important confounders. However, it is still possible that we overlooked unmeasured factors that may diminish the significance of the observed relationship. We turn to sensitivity analysis to understand how strong an unobserved confounder must be to undermine the significance of the results (Cinelli and Hazlett, 2020). We find that an unobserved confounder must explain 7.5% (Italy) or 11% (Brazil) of the residual variance of both the private debt importance and the support for public debt reduction to eliminate the significance of the finding. In the case of public debt repayment, an unobserved confounder must explain 11.8% (Italy) or 6.8% (Brazil) of the residual variance to have the same effect. In an alternative analysis, which we present in the Supplementary Appendix, we show that the finding would be robust to a confounder that was three times the size of vote choice. Figure 2: Effect of Private Debt Importance on Public Debt Preferences. Each panel presents the coefficient from six models regressing either the public debt reduction, repayment, or punishment outcome on household debt attitudes. Models include none or a full set of additional covariates and are estimated with robust standard errors. Each marker represents the coefficient and the lines indicate the 95% confidence intervals. In Brazil, the sample size is N=1,484 and N=1,454 for the bivariate and model with controls respectively. In Italy, the sample size is N=1,719 and N=1,179 respectively. Non-response on covariates explain the sample size discrepancies. Next, it is possible that the no trade-off condition in the dependent variable is driving the findings. In which case, the results would not hold in situations where taxes or spending cuts are necessary to reduce or repay sovereign debt. We show in the Supplementary Appendix that the relationship holds even when separately regressing each component of the DV index (taxes and spending) on private debt attitudes. ##### Moral Conviction We now examine the moral conviction hypothesis. As mentioned above, we asked respondents how much of their decision about what the family should do about their debts was motivated by their moral beliefs. Given that moral beliefs can motivate both default and repayment, we interact this variable with the importance scale we used above. In each of these models, we control for attitude extremity and the relevance of private debt. Figure 3 presents four panels showing the marginal effect of moral conviction across the values of private debt importance for each of the country-outcome combinations. In all four panels, we see that marginal effects have a slope consistent with the moral conviction hypothesis. Moral conviction decreases support for sovereign debt repayment when respondents think repaying private debts is not a high priority and moral conviction is positive when respondents place a high value on repaying private debt. We find that moral conviction about private debt reduces support for public debt reduction and repayment in Brazil among those who place a low value on private debt repayment in three of four combinations. However, we should note that there are few respondents in the low-importance category relative to those who view repaying private debts as important. In Italy, we do find that moral conviction is associated with sovereign debt repayment among those who view repaying private debt as important, supporting the moral conviction hypothesis. Yet, this isn’t significant for public debt reduction. This is an interesting finding. It suggests, at least in Italy, that debt repayment is more closely tied to moral conviction than debt reduction. This is consistent with the idea that repayment is a moral “red line” (Del Ponte and DeScioli, 2022). Indeed, previous work finds that defaulting on a commitment to repay a portion of the debt is not as serious as defaulting on the promise to repay in full (Del Ponte and DeScioli, 2022). Together with the results from previous work, the present findings suggest that debt reduction does not elicit an equivalent categorical imperative to repayment. A possible reason is that debt reduction implies that the creditor is amenable to offering more opportunities to reduce the debt in the future rather than demanding that all outstanding debt be repaid right away. Next, we present the symmetrical marginal effects from the interaction models. While we didn’t preregister this test, we think it is informative. Figure 4 shows that private debt attitudes are only significant among those who report their attitudes on private debt as being informed by their moral conviction across all four panels. This is consistent with our expectation that moral attitudes on private debt are responsible for the link between private and sovereign debt attitudes and thus worth reporting in the manuscript. Overall, the findings from this observational study suggest that citizens’ attitudes toward public debt, in countries where debt is highly political and highly consequential, are strongly correlated with their attitudes toward private debt (folk economics hypothesis) and are strongest when motivated by moral conviction (moral conviction hypothesis). The relationship persists even when accounting for political partisanship, financial literacy, or the relevance of debt in their daily lives. Beyond the association, we show that moral conviction about whether it is right or wrong to repay debts is associated with attitudes toward debt repayment. In Italy, those who have strong moral convictions about repaying private debt are more supportive of repaying sovereign debt. In Brazil, moral conviction, among those who place a lower priority on debt repayment, is negatively associated with debt repayment. Still, however, the effect of private debt attitudes across both outcomes is strongest among those who report their responses were due to moral conviction. Figure 3: Effect of Moral Conviction Across Private Debt Importance: Here we present the marginal effect (and 95% CI) of Moral Conviction across Private debt importance for 2 different outcomes in each country. The red vertical lines indicate the 95% CIs around the marginal effects when “binning” observations in to equally sized groups (low, medium, high) upon the recommendation of Hainmueller et al. (2019). Each model controls for the relevance of personal debt and attitude extremity. Figure 4: Effect of Private Debt Importance Across Moral Conviction: Here we present the marginal effect (and 95% CI) of Private debt importance across moral conviction for 2 different outcomes in each country. The red vertical lines indicate the 95% CIs around the marginal effects when “binning” observations into equally sized groups (low, medium, high) upon the recommendation of Hainmueller et al. (2019). Each model controls for the relevance of personal debt and attitude extremity. ### Experimental Study Despite our best efforts, unmeasured confounders still may drive the observational findings. To provide causal evidence for the folk economics hypothesis, we designed a survey experiment, conducted with a separate Italian sample (N = 1,215), to test if manipulating attitudes toward private debt can alter citizens’ public debt attitudes.[^7] Our experiment builds on the observational study’s vignette. In one condition, we present a sympathetic scenario (Pro-debt condition) in which a family is deciding on whether to repay their bills because separate external events led to the occurrence of the loan and the inability to repay the loan. Our second scenario omits the reasons for the loan and repayment difficulty while adding a short passage about friends and family shaming a family for considering default (Anti-Debt Condition). Table 2 presents the translation of these changes. Importantly, each of these additions to the vignette is aimed at generating a vivid picture that elicits strong pro- or anti-debt feelings rather than at isolating the causes of what generates these feelings. Because our ultimate goal is to see whether attitudes about private debt have a causal effect on attitudes toward public debt, the add-on vignettes are simply tasked to generate strong feelings. We leave to future work the measurement of what specific features create these general pro- or anti-debt feelings. Previous evidence shows that people’s moral judgments about debt are typically inflexible. At the same time, people’s support for default depends on the details of the situation, such as how harsh the consequences for defaulting would be for the borrower (Del Ponte and DeScioli, 2022). This makes manipulating these attitudes difficult, but not impossible. In moral dilemmas about debt, moral attitudes about debt markets are driven by two opposing narratives that are not mutually exclusive. On one hand, banks requiring repayment Table 2: Experimental Vignette Changes #### Pro-Debt Condition: The Rossi are a family of four living in a small mountain village. A few years ago, the #### Rossi found themselves in serious economic difficulties and had to take a loan of one hundred thousand euros from the cooperative credit union near their home to get their small business back on its feet after it was destroyed by the flood. #### At the time, the Rossi promised to repay the debt in ten years. Now, a few years later, the Rossi find themselves in further financial difficulties to care for their seriously ill daughter and can no longer make it to pay the loan installment... #### Anti-Debt Condition: ...The Rossi family consulted with the rest of their family and friends about what to do. Their parents pointed out that for the Rossi, repaying debts is a point of honor-they have always repaid everything down to the last penny. If their children neglected the debt now, the parents would be furious. Their dear friend Paola added that she would not want to be seen around with people who do not pay their debts. The Rossi made a commitment when she took out the loan. Breaking that commitment would be something to be ashamed of. and high interest when individuals are vulnerable is seen as immoral given it violates fairness concerns. At the same time, many see repudiating debt as immoral as it violates the promise to repay and infringes on the creditor’s property rights over the sum of money owed. Our hope is that activating either one of these frames at the private debt level can, at the margin, change individual attitudes toward sovereign debt outcomes. This would be strong evidence that individuals are drawing on intuitions of private debt to inform their attitudes on government debt. As such, our primary hypothesis is that the anti-debt treatment will increase support for public debt reduction and repayment. As above, we also examine how the treatment impacts the willingness to punish a leader who defaults on debt. Figure 5 shows the standardized average treatment effect (ATE) for three models, each estimating a different outcome (reduce, repay, and punishment of a defaulting leader). The results provide support for the folk economics hypothesis. Manipulating feelings and intuitions about private debt influences support for public debt repayment (d=0.14) and punishment (d=0.20), but not reduction. Together with our findings about moral conviction, this suggests that debt reduction is less susceptible to moralizing (or at least on other dimensions) and more relevant to economic costs or other moral dimensions (e.g., deservingness) than sovereign debt repayment. ### Conclusion Citizens have the ability to use democratic or extra-democratic means to remove leaders that fail to manage public debt effectively (DiGiuseppe and Shea, 2015; Ballard-Rosa, 2016; Biglaiser et al., 2023). This means that elites cannot ignore the public when deciding on issues that have dramatic distributive consequences like sovereign debt policy. Thus it is critical to understand what the public thinks about public debt if scholars want to understand variance in public debt outcomes. While previous literature has shown that elites can, to some Figure 5: Effect of the Importance of Private Debt Repayment on Public Debt Outcomes: This plot shows the standardized ATE (and 95% CI) for three different outcome variables in Italy (N = 1,215) estimated with OLS. Each model was estimated with a set of covariates to increase precision and robust standard errors. Covariates were selected agnostically following the recommendation of Bloniarz et al. (2016). degree, shape opinions on public debt (Bansak et al., 2021; Barnes and Hicks, 2018; Nelson and Steinberg, 2018), this nascent literature leaves much to be explored. In three nationally representative samples in Brazil and Italy, we investigated the relationship between attitudes toward private and sovereign debt. In our observational study in Brazil and Italy, we find that citizens’ attitudes toward sovereign debt repayment and reduction are associated with their moral convictions and intuitions regarding private debt. These results are consistent with the predictions of the folk economics hypothesis, which proposes that citizens’ attitudes about mass economic policy are rooted in their intuitions about folk (everyday) economics. Moreover, individuals who place greater moral importance on repaying private debts are more likely to support government debt repayment and austerity policies, consistent with the moral conviction hypothesis. The relationship persists even after accounting for partisan identification, financial literacy, income levels, and other factors. Our experimental study in Italy further demonstrates that manipulating people’s moral attitudes toward private debt changes their opinions on public debt default. Together, these results indicate that public preferences on sovereign debt policy are not solely a product of ego-tropic or top-down elite rhetoric, as previous work has found (Barnes and Hicks, 2018; Bansak et al., 2021; Bisgaard and Slothuus, 2018; Del Ponte, 2021). Many citizens appear to rely on intuitive folk economic beliefs about household finance and personal morality, consistent with recent accounts from evolutionary political psychology (Petersen, 2015; Boyer and Petersen, 2018). Just as attitudes about fairness and reciprocity shape opinions on welfare policy or trade agreements and redistribution, they also impact judgments on the management of sovereign debt. In all, the study increases our understanding of the micro-foundations behind the public constraint on debt reduction and repayment. For policymakers and international creditors negotiating debt restructurings, being attentive to the public’s moral intuitions about private debt could improve the chances of public acceptance of politically difficult repayment plans or austerity measures. Beyond preferences for debt reduction and repayment, the present research builds on the growing recognition that the behavioral revolution in political science (Ostrom, 1998; Del Ponte et al., 2020) and international relations (Hafner-Burton et al., 2017) can help improve our understanding of politics, including citizens’ preferences for economic policy (e.g., Bechtel et al. (2014); Rathbun et al. (2019); Huddy and Del Ponte (2019); Mutz (2021)). By relying on the idea of folk-economic beliefs, we show that the impact of citizens’ morality can be as far-reaching as matters about redistribution, trade, and even international finance. Our contribution furthers the literature in international relations linking moral judgments and public opinion about international crises (Ginges et al., 2007; Sagan and Valentino, 2017; Press et al., 2013). Future research could expand on our findings. Additional experiments that prime specific moral values may further isolate folk economic beliefs that shape public debt attitudes. It would also be informative to explore if cues from elites can override these preexisting values when formulating positions on sovereign debt disputes. Comparative work could examine if debt morality effects vary across political and economic contexts. In all, our results indicate that intuitive private debt ethics is an important determinant of public opinion on sovereign debt that deserves greater scholarly attention. ### References Aarøe, Lene and Michael Bang Petersen (2014). Crowding out culture: Scandinavians and americans agree on social welfare in the face of deservingness cues. The Journal of Politics 76 (3), 684–697. Alesina, Alberto and Andrea Passalacqua (2016). The political economy of government debt. Handbook of macroeconomics 2, 2599–2651. Almenberg, Johan , Annamaria Lusardi, Jenny S¨ave-S¨oderbergh, and Roine Vestman (2021). 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However, reducing debt also means cutting government spending programs, laying off public employees and introducing higher taxes. - Brazil: Please read the following passage carefully. Brazilian government debt is at historically high levels. Brazil’s national debt has grown to 75 A high national debt limits the ability to invest in the future and creates fewer opportunities for Brazilians. Increased debt reduces business investment and slows economic growth. If the debt gets too high, it will limit the government’s ability to respond to unexpected events in the future, such as a war, natural disasters, or another pandemic. Despite this, reducing the debt will probably mean cutting government programs, laying off government employees and raising taxes. - Common Outcome Questions - Reduction: Please indicate your degree of agreement with the following sentences. – “The government should reduce the debt.” – “The government should reduce the debt even if it means lower government spending” – “The government should reduce the debt, even if it means higher taxes” - Common Outcome Questions - Repayment: With national debt payments coming due soon, the government will have to make a decision. The government can either pay the debt or default on the debt. If Brazil[Italy] defaults on the debt, the government will have more money to meet Brazilians’[Italians] immediate needs, but it will also compromise the government’s ability to borrow money in the future. If Brazil[Italy] repays the debt, the government will have to raise taxes and cut government programs. Please indicate your degree of agreement with the following sentences. – “The government should reduce the debt.” – “The government should reduce the debt even if it means lower government spending” – “The government should reduce the debt, even if it means higher taxes” ### A2 Summary Statistics Table A1: Summary Statistics: Italy Observational Unique (#) Missing (%) Mean SD Min Median Max ```text HHDebt Attitude 5 16 0.8 0.2 0.0 0.7 1.0 Left.Right 12 16 5.4 2.5 0.0 5.0 10.0 LRsq 12 16 35.0 27.8 0.0 25.0 100.0 Age 60 1 46.5 14.7 17.0 47.0 75.0 Woman 2 0 0.5 0.5 0.0 1.0 1.0 Income 5 26 1.4 1.2 0.0 1.0 3.0 Debt over 10% 3 19 0.5 0.5 0.0 1.0 1.0 No Ivestments 2 0 0.6 0.5 0.0 1.0 1.0 Borrowing Plans 5 19 0.7 0.9 0.0 0.0 3.0 Fin Lit Correct 8 0 2.4 2.2 0.0 2.0 7.0 Unemployed 2 0 0.2 0.4 0.0 0.0 1.0 Education 6 16 3.3 1.2 1.0 4.0 5.0 Student 2 0 0.1 0.2 0.0 0.0 1.0 Pensioner 2 0 0.1 0.3 0.0 0.0 1.0 Public Sector 2 0 0.1 0.3 0.0 0.0 1.0 Meloni Approval 4 32 1.7 0.6 1.0 2.0 3.0 ``` Party Vote and Region Excluded Table A2: Summary Statistics: Brazil Observational Unique (#) Missing (%) Mean SD Min Median Max ```text HH.Debt 6 0 0.7 0.2 0.0 0.8 1.0 Left-Right 11 0 5.6 3.2 0.0 5.0 10.0 Age 63 0 41.1 15.8 18.0 39.0 90.0 Woman 2 0 0.5 0.5 0.0 0.0 1.0 Income 4 0 1.3 1.1 0.0 1.0 3.0 Debt over 20% 3 2 0.3 0.5 0.0 0.0 1.0 Ivestments 3 1 0.4 0.5 0.0 0.0 1.0 Fin Lit Correct 9 1 3.0 1.8 0.0 3.0 7.0 Unemployed 2 0 0.2 0.4 0.0 0.0 1.0 Education 3 0 1.2 0.6 0.0 1.0 2.0 Student 2 0 0.1 0.2 0.0 0.0 1.0 Retired 2 0 0.1 0.3 0.0 0.0 1.0 Public Sector 2 0 0.1 0.3 0.0 0.0 1.0 Lula Approval 5 1 1.5 1.2 0.0 2.0 3.0 ``` Party Vote and Region Excluded ### A3 Results with Disaggregated DV Figure A1: Effect of the Importance of Private Debt Repayment on Disaggregated Public Debt Outcomes: Here we show the point estimates and confidence intervals for models predicting each of the 3 public debt outcomes used to construct the indices used in the main analysis. The “General” condition states no trade-off to reduce the debt, the “Spending Cuts” and “Taxes” indicate support for debt reduction or repayment under each condition. Each model includes the full set of covariates described above. ### A4 Results with Categorical Independent Variable Table A3: Italy: Categorical Household Debt Preferences Reduce Repay ```text Not at all important −0.093 −0.151* ``` (0.062) (0.071) ```text Slightly important −0.043* −0.079** ``` (0.020) (0.024) Extremely important 0.036*** 0.047*** (0.011) (0.013) ```text Num.Obs. 1177 1177 R2 0.077 0.133 ``` + p < 0.1, * p < 0.05, ** p < 0.01, *** p < 0.001 Baseline condition is ”Very Important”. A full set of covariates is included in the models but omitted from the table. Table A4: Brazil: Categorical Household Debt Preferences Reduce Repay ```text Not at all important −0.084** −0.073+ ``` (0.031) (0.040) ```text Slightly important −0.032 −0.042 ``` (0.026) (0.031) Moderately important −0.032** −0.025* (0.010) (0.012) ```text Extremely important 0.038** 0.038* ``` (0.012) (0.015) ```text Num.Obs. 1443 1441 R2 0.086 0.073 ``` + p < 0.1, * p < 0.05, ** p < 0.01, *** p < 0.001 + p < 0.1, * p < 0.05, ** p < 0.01, *** p < 0.001 Baseline condition is ”Very Important”. A full set of covariates is included in the models but omitted from the table. ### A5 Distractor Module: To reduce the threat of public debt priming, we asked demographic questions and included a passage and two questions to distract respondents. it read as follows: “Please read the following text carefully, which is about the animals of the world. Afterwards, we will ask you some questions to check your understanding of the text. The Komondor, also known as the Hungarian shepherd dog, is distinguished by its distinctive white, long, broom-like braided coat. The coat is soft and feathery, but because it is curly, it tends to twist as the puppy grows into an adult. As an adult, the coat is soft in the part in contact with the skin while the outer coat is coarser and joins to form large bangs. Also known as the Mexican walking fish, the Axolotl is one of the most unique amphibians in the world. Aside from the ingenious exterior, the amphibian is neotenic, meaning that adults remain aquatic and gillless instead of undergoing metamorphosis when they reach maturity. They also have the ability to regenerate almost all parts of their bodies. Although axolotls are nearly extinct in their native Mexico, they have thrived in captivity and have become valued by the scientific world and ordinary people as pets.” - Which of the following animals is known as the ”Mexican walking fish”? [Axolotl, Komondor, Excalibur, Cacutua] - The Hungarian sheepdog is also known by what name? [Komondor, Alano, Molosso, Volpino] ### A6 Question Order Effects Figure A2: Survey Order Effect: This figure presents the coefficient of the interaction term of private debt importance and survey order (sovereign debt after private debt) and its 95% confidence interval for three separate models in both Italy and Brazil each with a different dependent variable. Each model includes the full set of covariates. ### A7 OLS Full Models Table A5: Models from Figure 2: Brazil ```text Reduce Reduce Punish Punish Repay Repay Bivar Full Set Bivar Full Set Bivar Full Set HH Debt 0.111*** 0.118*** 0.105*** 0.112*** 0.012** 0.014** (0.021) (0.021) (0.026) (0.026) (0.004) (0.004) Left-Right 0.003 0.012+ 0.000 (0.005) (0.006) (0.001) Left-Right sq. 0.000 0.000 0.000 (0.000) (0.001) (0.000) Age 0.000 -0.001 0.000 (0.002) (0.002) (0.000) Woman -0.038*** -0.033** -0.005** (0.009) (0.011) (0.002) Income 1 0.000 -0.007 0.002 (0.012) (0.014) (0.002) Income 2 0.000 -0.011 0.001 (0.014) (0.017) (0.003) Income 3 -0.013 -0.021 -0.003 (0.014) (0.018) (0.003) Debt over 20% 0.005 0.013 0.003 (0.010) (0.012) (0.002) Fin Lit 1 Correct 0.022 0.025 -0.003 (0.018) (0.022) (0.004) Fin Lit 2 Correct 0.010 0.002 0.003 (0.017) (0.021) (0.004) Fin Lit 3 Correct 0.022 0.022 -0.002 (0.017) (0.020) (0.004) Fin Lit 4 Correct 0.026 0.010 0.001 (0.017) (0.021) (0.004) Fin Lit 5 Correct 0.024 0.010 0.005 (0.019) (0.023) (0.004) Fin Lit 6 Correct 0.064** 0.053* 0.004 (0.019) (0.026) (0.005) Fin Lit 7 Correct 0.006 0.047 0.005 (0.043) (0.048) (0.008) Unemployed -0.031* -0.023 0.000 (0.013) (0.016) (0.003) Education 1 -0.020 -0.015 0.004 (0.014) (0.017) (0.003) Education 2 -0.031* -0.036+ 0.005 (0.015) (0.019) (0.003) Student -0.001 -0.036 -0.004 (0.019) (0.022) (0.004) Retired -0.004 -0.014 0.001 (0.018) (0.022) (0.004) Public Sector -0.025+ 0.000 -0.005 (0.013) (0.018) (0.003) Lula Approval 0.012+ 0.012+ -0.006*** (0.007) (0.007) (0.001) Nordeste -0.013 -0.026 0.003 (0.017) (0.023) (0.004) Norte -0.016 -0.041 0.003 (0.021) (0.027) (0.005) Sudeste -0.027 -0.042* 0.000 (0.016) (0.022) (0.004) Sul -0.028 -0.031 -0.001 (0.019) (0.024) (0.004) Vote: MDB 0.016 -0.025 -0.003 (0.028) (0.045) (0.007) Vote: Other 0.003 -0.027 0.001 (0.017) (0.020) (0.004) Vote: PDT -0.001 -0.029 -0.010 (0.040) (0.047) (0.008) Vote: PT -0.017 -0.034+ -0.003 (0.016) (0.018) (0.003) Vote: PL 0.025 0.015 0.000 (0.016) (0.018) (0.003) Vote: NOVO 0.077** 0.085* 0.012+ (0.026) (0.037) (0.006) Vote: Uni˜ao Brasil 0.012 -0.041 -0.012+ (0.036) (0.044) (0.007) RMSE 0.17 0.16 0.20 0.20 0.04 0.03 Num.Obs. 1484 1443 1481 1441 1483 1443 R2 0.024 0.084 0.015 0.072 0.005 0.093 ``` + p < 0.1, * p < 0.05, ** p < 0.01, *** p < 0.001 Table A6: Models from Figure 2: Italy ```text Reduce Reduce Punish Punish Repay Repay Bivar Full Set Bivar Full Set Bivar Full Set HH Debt 0.093*** 0.116*** 0.148*** 0.197*** 0.141*** 0.174*** (0.022) (0.024) (0.035) (0.040) (0.024) (0.029) Left-Right −0.004 −0.003 0.013 (0.009) (0.015) (0.011) Left-Right sq. 0.000 −0.001 −0.002* (0.001) (0.001) (0.001) Age −0.002 −0.002 −0.007* (0.003) (0.005) (0.003) Woman −0.045*** −0.030 −0.035** (0.011) (0.019) (0.013) Income 1 0.023 −0.024 −0.004 (0.014) (0.024) (0.017) Income 2 0.019 −0.017 −0.001 (0.014) (0.025) (0.017) Income 3 0.012 0.026 0.010 (0.015) (0.026) (0.018) Debt over 10% −0.010 −0.026 −0.016 (0.010) (0.018) (0.012) Borrowing Plans 0.006 0.008 0.001 (0.006) (0.010) (0.007) Fin Lit 1 Correct 0.007 −0.035 −0.033 (0.019) (0.032) (0.022) Fin Lit 2 Correct 0.012 −0.061+ −0.047* (0.020) (0.031) (0.022) Fin Lit 3 Correct 0.001 −0.073* −0.033 (0.019) (0.031) (0.021) Fin Lit 4 Correct −0.020 −0.071* −0.015 (0.021) (0.032) (0.023) Fin Lit 5 Correct −0.043* −0.060+ −0.046+ (0.022) (0.033) (0.024) Fin Lit 6 Correct −0.038 −0.083* 0.005 (0.026) (0.041) (0.026) Fin Lit 7 Correct −0.038 −0.051 0.003 (0.032) (0.054) (0.036) Unemployed 0.021 0.004 −0.001 (0.015) (0.025) (0.018) Education 1 −0.016 −0.132+ −0.020 (0.038) (0.069) (0.048) Education 2 −0.012 −0.121+ −0.005 (0.039) (0.071) (0.050) Education 3 −0.019 −0.151* −0.026 (0.039) (0.070) (0.049) Education 4 −0.024 −0.119 −0.019 (0.041) (0.072) (0.051) Student 0.010 −0.056 0.004 (0.026) (0.042) (0.031) Pensioner 0.026 −0.007 0.014 (0.019) (0.033) (0.022) Public Sector 0.024 0.023 0.010 (0.019) (0.030) (0.022) Meloni Approval 0.002 −0.024 0.033** (0.010) (0.017) (0.011) Region 2 −0.026 −0.050 −0.037 (0.019) (0.033) (0.023) Region 3 −0.021 0.003 −0.004 (0.016) (0.026) (0.018) Region 4 −0.004 0.018 −0.006 (0.015) (0.025) (0.018) Region 5 −0.008 0.026 −0.004 (0.017) (0.027) (0.019) Vote: Altro partito di centro-sinistra 0.111* 0.191* 0.205** (0.051) (0.077) (0.070) Vote: Azione e Italia Viva 0.061 0.290*** 0.194** (0.048) (0.079) (0.068) Vote: Forza Italia 0.092* 0.145+ 0.124+ (0.046) (0.074) (0.067) Vote: Fratelli d’Italia 0.068 0.128+ 0.136* (0.042) (0.067) (0.064) Vote: Lega 0.074+ 0.189** 0.116+ (0.044) (0.073) (0.066) Vote: Movimento 5 Stelle 0.040 0.198** 0.098 (0.045) (0.070) (0.066) Vote: Non voto 0.045 0.149* 0.093 (0.044) (0.069) (0.065) Vote: Partito Democratico 0.105* 0.209** 0.176** (0.047) (0.073) (0.068) Vote: Preferisco non rispondere 0.062 0.176* 0.084 (0.044) (0.069) (0.065) RMSE 0.18 0.17 0.31 0.29 0.21 0.20 Num.Obs. 1719 1177 1717 1177 1717 1177 R2 0.014 0.076 0.012 0.112 0.024 0.132 ``` + p < 0.1, * p < 0.05, ** p < 0.01, *** p < 0.001 Table A7: Full Interaction Models ```text Reduce Repay Punish Italy Brazil Italy Brazil Italy Brazil HH Debt −0.061 0.002 −0.103 −0.041 0.019 −0.045 (0.070) (0.047) (0.080) (0.063) (0.012) (0.032) Moral −0.154* −0.116* −0.137+ −0.188** 0.015 −0.062+ Conviction (0.074) (0.055) (0.081) (0.068) (0.012) (0.035) HH 0.199* 0.157* 0.281** 0.246** −0.012 0.115* X Conviction (0.091) (0.074) (0.102) (0.093) (0.016) (0.049) Att. Extremity −0.046 0.006 −0.082 0.000 −0.015+ 0.003 (0.053) (0.009) (0.054) (0.010) (0.008) (0.005) Relevance 0.020 0.013* −0.003 0.011 0.004 0.003 (0.021) (0.006) (0.025) (0.008) (0.004) (0.004) Left-Right 0.001 0.006*** −0.004+ 0.009*** −0.003*** 0.006*** (0.002) (0.001) (0.002) (0.002) (0.000) (0.001) Num.Obs. 1707 1483 1705 1480 1705 1481 R2 0.020 0.047 0.038 0.046 0.055 0.040 ``` + p < 0.1, * p < 0.05, ** p < 0.01, *** p < 0.001 ### A8 Sensitivity Analysis In the main text we noted we conducted sensitivity analysis following the method of (Cinelli and Hazlett, 2020). Here we present sensitivity contour plots for the debt reduction and repayment variables. The plots indicate that combination of R[^2] of a potential confounder with the outcome and treatment variables that would bring the t-value of the treatment under 1.96 and render the results “insignificant”. The bottom left corner of each graph indicates the place on this graph of a confounder 1x, 2x, and 3x the size of a compound benchmark. The compound variable used in the analysis includes the following variables: Left-Right, Left-Right squared, dummies for each vote choice, and approval of Meloni/da Silva as prime minister. In each of the four panels, we see private debt importance would retain significance even an unmeasured confounder that was 3x the size of his compound variable. Figure A3: Italy: Sensitivity Analysis contour plot with Debt Reduction DV. Figure A4: Italy: Sensitivity Analysis contour plot with Debt Repayment DV. Figure A5: Brazil: Sensitivity Analysis contour plot with Debt Reduction DV. Figure A6: Brazil: Sensitivity Analysis contour plot with Debt Repayment DV. ### A9 Balance Table for Experimental Study Table A8: Balance in Experimental Study 0 1 Mean Std. Dev. Mean Std. Dev. Diff. in Means Std. Error ```text Left-Right 5.2 2.7 5.1 2.7 -0.1 0.2 Age 48.5 14.0 48.1 13.8 -0.3 0.8 Income 5.2 2.6 5.1 2.7 -0.1 0.2 Region Centro 0.2 0.4 0.2 0.4 0.0 0.0 Region Isole 0.1 0.3 0.1 0.3 0.0 0.0 Region Nord-Est 0.2 0.4 0.2 0.4 0.0 0.0 Region Nord-Ovest 0.3 0.5 0.3 0.4 0.0 0.0 Region Sud 0.2 0.4 0.2 0.4 0.0 0.0 Male 0.5 0.5 0.5 0.5 0.0 0.0 ``` ### A10 Consent Form The following passage (translated in to English) asking for consent was included in each of the studies: “Information note: Thank you for agreeing to take part in this study. The data collected will be used in academic research to help us understand your perspectives on economic policy. By agreeing to participate in this study, you will be asked to complete an online questionnaire lasting approximately 10 minutes. There are no foreseeable risks associated with this project. However, your participation in this study is totally voluntary and you are free to opt out at any time. Your responses will be treated totally confidentially and the research data will be reported anonymously. These data will be stored in a secure server and used by the researchers solely in the course of their analytical work on aggregate data. No personal information will be collected. We will preserve your data in perpetuity and protect any confidential data. The data, in an anonymous form, will be shared with third parties from the time of publication of any article resulting from the project. We will use the data to conduct statistical analysis and draw general conclusions. The project will be published in open-access mode so that those interested can consult the final project. Clicking the ”I agree” option below indicates that you are at least 18 years old, have read and understand this release, and agree to take part in this research study.” ### A11 Respondent Compensation We recruited respondents through the survey firms Netquest and Respondi. Their compensation scheme is proprietary. As such, we cannot give further details. ### Notes [^1]: Our study differs on several accounts. First, we are not interested in the influence of a specific policy analogy but rather in the relationship between attitudes towards debt in private and public domains more generally. Second, Barnes and Hicks (2022) are interested in the relationship between agreement with the analogy and support for fiscal balance, we seek to understand a broader relationship between private and public debt reduction and repayment. Moreover, we are interested in the costs associated with reining in large debts through sacrifice rather than keeping a balanced budget. In the face of such sacrifices, individuals are less likely to see an agreement between private and public debt preferences. This is important because individuals may deviate from their principles when breaking those principles achieves better material consequences. The contrast between moral taboos and better consequences obtained by breaking those taboos generates a moral dilemma where people may accept breaking the taboo to secure a better outcome. Lastly, we examine the extent to which moral conviction over private debt repayment extends into attitudes about public debt management and repayment. [^2]: We recruited our quota samples with the survey firms Respondi (Italy) and Netquest (Brazil). The Italian sample was collected between January 18-31, 2023. The Brazilian sample was collected between February 10-27, 2023. [^3]: https://www.economist.com/the-americas/2022/12/31/brazils-new-president-faces-a-fiscal-crunch-and-a-fickle-congress [^4]: We randomize the order of these two questions. [^5]: See Supplementary Appendix. [^6]: This statistic for Left-right is calculated using estimates excluding the squared term and omitting party vote from the model. [^7]: This is a quota sample, provided by NetQuest, representative on age, sex, and region. We also preregistered and fielded a similar experimental study with weaker treatments as part of this project, prior to this study, that resulted in null findings. This study reflects the need for stronger treatments to move deeply held attitudes on both private and sovereign debt.