Abstract
Governments often find it hard to pursue economic reforms, even if they eventually will benefit a majority of voters. The literature remains inconclusive about the reasons for this. Some scholars, on the one hand, stress the role of distributional conflicts between different classes, for instance dividing the young and the old in the case of pay-as-you-go pensions. Others have highlighted that resistance to reform is rather broad-based owing to the public’s poor understanding of the need for reform. This paper attempts to disentangle the drivers of public acceptance of reform by means of a case study: the 2012 increase of the Dutch statutory retirement age from 65 to 67. We exploit a unique longitudinal dataset on the attitudes of Dutch households respecting pension reform in the 2003–2013 period. Our findings offer various new insights. First, we find that education, occupational status and psychological traits were the most systematic drivers of reform preferences, while age had a limited impact. Second, and significantly, we find that the year fixed effects were the main drivers of respondents’ acceptance of reform. We interpret the pattern of the year coefficients as evidence of a collective learning process whereby households gradually updated their expectations and reform preferences in light of new information.
Highlights
Governments often find it hard to pursue economic reforms
We first discuss the results for age, which plays a dominant role in political economy models of PAYG reform
While married respondents were anxious about raising the retirement age, they tended to be indifferent towards the payroll taxes, but preferred reducing the level of public pension benefits. Governments often find it hard to pursue economic reforms, even if they benefit a majority of voters
Summary
Governments often find it hard to pursue economic reforms. Two general sets of considerations have been put forward to explain this. Universal welfare programs tend to be rather popular with large numbers of the electorate (Pierson 1996; Brooks and Manza 2006; Vis 2016) and the public may often not appreciate that reforms are necessary (Boeri et al 2001, 2002; Blinder and Krueger 2004; Caplan 2007). In this context, voters who eventually gain may resist change (Pitlik et al 2014). In the purported words of former Eurogroup president Juncker, ‘‘We all know what to do but we don’t know how to be re-elected once we have done it’’ (The Economist 2007, quoted in Buti et al 2008)
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