INFORMATION, SOURCE CREDIBILITY AND POLITICAL SOPHISTICATION: EXPERIMENTAL EVIDENCE ON ECONOMIC VOTING∗ JAMES E. ALTy DAVID D. LASSENz JOHN MARSHALLx APRIL 2014 How does the source of politically-relevant economic information affect voter beliefs and ultimately political preferences? This paper randomly varies whether voters re- ceive an aggregate unemployment projection from the central bank, government or opposition party using a survey experiment in Denmark with unique access to detailed panel and administrative data. All sources induce voters to update their unemployment expectations. While all voters regard the Danish Central Bank as the most credible source, only sophisticated voters update more after receiving information from a party with political incentives to state otherwise. However, belief updating is no greater when the source is aligned with the voter’s previously expressed political preferences. After decreasing unemployment expectations, we find clear evidence of intended eco- nomic voting, without voters changing their policy preferences: the average respon- dent is 3.5 percentage points more likely to vote for the government. Such economic voting is driven by politically sophisticated rather than swing voters. ∗We wish to thank Alberto Abadie, Charlotte Cavaille, Alex Fouirnaies, Torben Iversen, Horacio Larreguy and Victoria Shineman for valuable advice and comments, as well as participants at the Harvard Political Economy and Comparative Politics workshops, NYU Center for Experimental Social Science Conference 2014, Midwest Political Science Association 2014, and MIT Political Economy Breakfast. Lassen thanks the Danish Council for Independent Research under its Sapere Aude program for financial assistance. yDepartment of Government, Harvard University, james [email protected]. zDepartment of Economics, University of Copenhagen, [email protected]. xDepartment of Government, Harvard University. [email protected]. (Corresponding author.) 1 1 Introduction Possessing and processing politically-relevant information is a central feature of how voters hold governments to account and express their preferences over policies. However, most evidence sug- gests that voters lack basic information about their political or economic contexts (see Anderson 2007). Thus, the provision of credible information has the potential to ensure politicians are more accountable to voters.1 This is particularly true for economic voting, where aggregate economic information updates voter beliefs about a government’s competence in office (Anderson 1995; Ro- goff and Sibert 1988). However, providing voters with credible information is not straight-forward in practice. In- formation is rarely provided by independent sources and without an accompanying slant. Rather, economic and political information is typically communicated by actors with incentives to deceive or persuade recipients (Baron 2006; Besley and Prat 2006; Larcinese, Puglisi and Snyder 2011). Recognizing that much of the information available to voters is biased,2 new information may not affect the beliefs of skeptical voters (Gentzkow and Shapiro 2006). This raises the question of when sources of political information affect voter beliefs and polit- ical preferences. We address this important and unanswered question by examining the conditions under which the source of messages conveying information about future aggregate unemployment— probably the most important indicator of government performance for voters (Anderson 1995)— affect voter beliefs and political preferences using a survey experiment. Our experiment is con- ducted in Denmark, an open economy where macroeconomic concerns have been highly salient in 1For example, information about corruption (Chong et al. 2011; Ferraz and Finan 2008), eco- nomic performance (Bartels 2008; Healy and Lenz 2014) and politician activity (Banerjee et al. 2011), and transparent chains of accountability (Powell Jr. and Whitten 1993) have helped hold governments to account at the polls. 2Goidel and Langley(1995) and Nadeau et al.(1999) document that voters do understand that sources of information may be biased. Similarly, many studies note significant differences in trust across political and media institutions (e.g. Dalton 2008). 2 the aftermath of the financial crisis and where left-right political divisions remain entrenched. The combination of a panel political survey and access to extremely detailed administrative govern- ment data provides a unique opportunity to understand in detail which voters update their beliefs and when such beliefs translate into economic voting. We first examine how the source of unemployment projections affect unemployment expecta- tions. We find that the objective credibility of the information source matters: an unemployment projection from the DCB, which is highly trusted among citizens, causes voters to update their belief more than receiving information from government or opposition political parties. While in- formation from both governing and opposition political parties do still affect voter beliefs, a more sophisticated subset of voters also recognize that a projection from a source with electoral incen- tives to say the opposite is more credible. However, we find no evidence of subjective credibility such that voters update more in response to unemployment projections from the party they favor. Our instrumental variable analysis shows that a percentage point decrease in unemployment expectations increases the probability that the average complier intends to vote for Denmark’s coalition government by 3.5 percentage points. This large effect, which only helped the parties of the Prime Minister and Minister for the Economy and Interior, would have been more than enough to have altered the outcome of Denmark’s recent knife-edge elections. Supporting the economic voting interpretation, we observe a large increase in confidence in the government and no change in support for non-government left-wing parties. Although these results could still reflect unemploy- ment expectations changing voter policy preferences, rather than beliefs regarding the competence of the government, unemployment expectations do not affect attitudes toward redistributive or un- employment insurance policies. Since assigning responsibility for policy outcomes is especially challenging in Denmark’s com- plex political system and very open economy, it is not surprising to find that providing new infor- mation only induces a subset of voters to vote economically. In particular, we find that economic voting is neither concentrated among swing voters nor ideologues. Rather, economic voting is only 3 observed among sophisticated—better informed, more educated and politically-engaged—voters and those who already believe the economy is improving. These results show that politically- relevant information can support democratic accountability, even in political environments where the clarity of responsibility is low, but is not sufficient to induce all voters to reward good per- formance. This finding may explain why parties tend to target target their messages at more politically-engaged voters who appear to be more sensitive to new information (Adams and Ezrow 2009; Gilens 2005). The paper is structured as follows. Section2 distinguishes the objective and subjective cred- ibility of a source of political messages, and considers how economic information might affect political preferences. Section3 details our experiments designed to parse out these effects. Section 4 examines how beliefs change, before Section5 maps these beliefs to vote intention and welfare policy preferences. Section6 concludes. 2 Theoretical motivation This section first considers how voters may differ in their responses to receiving politically-relevant information from different sources. Focusing on aggregate unemployment expectations, we then consider how such information could affect economic voting. 2.1 Information sources Despite long-running attention to economic voting and growing interest in political information, it remains unclear what types of new information will change the beliefs and behavior of voters. Many researchers treat information as an unbiased resource helping voters to make the right deci- sion (e.g. Feddersen and Pesendorfer 1996), or assume that voters start from a common prior (e.g. Rogoff and Sibert 1988; Rogoff 1990). In experimental work, information is frequently provided without a source and consequently relies upon the experimenter’s credibility. 4 However, in the real world, most politically-relevant information is conveyed by agents with distinct and often well-understood ideological biases and incentives to distort perceptions of the true state of the world (e.g. Baron 2006; Besley and Prat 2006; Gentzkow and Shapiro 2006; Zaller 1999).3 Empirically, Larcinese, Puglisi and Snyder(2011) have shown that pro-Democrat newspa- pers in the U.S. are more likely to report high unemployment under Republican Presidents, while Durante and Knight(2012) point to significant biases in television coverage in Italy. Accordingly, voters must evaluate the information they receive in terms of the credibility of the source. We distinguish two forms of source credibility that could affect belief updating after receiving new information. Objective credibility reflects beliefs about the source’s credibility that depend upon institutional characteristics of the source that are extrinsic to the voter (see also Ansolabehere, Meredith and Snowberg forthcoming;