Another Day, Another Currency: Self-interest, Experience, and Attitudes Toward Dollarization in Ecuador

Abstract

AbstractHow, if at all, does self-interest bear on individuals’ economic policy preferences? Though conventional theories of preference formation usually assume a role for self-interest, the informational demands associated with understanding economic policies can prevent individuals from forming attitudes on an egocentric basis. Building on work showing that policy-specific information facilitates egocentrism, we argue that personal experience with alternative policy options is necessary for self-interested preferences to materialize. To test this argument, we leverage Ecuador’s adoption of the U.S. dollar (i.e., dollarization) and examine whether material-based preferences toward exchange rate policy are conditional on individuals experiencing the transition from the Ecuadorian sucre to the dollar. We find that lived experience with dollarization causes policy preferences to align more closely with citizens’ self-interest, as proxied by measures of capital ownership and skill level. In addition, personal experience with dollarization drives attitudes against a dollarized economy, but primarily among poor and low-skill workers—precisely the groups that benefit less from this policy shift. Rather than entirely discredit the role of economic self-interest, these findings suggest that scholars devote greater attention to how contextual factors can strengthen egocentric policy attitudes.