Party cues or policy information? The differential influence of financial and economic literacy on economic policy preferences

Abstract

AbstractPolitical economy theories tell us that policy preferences are driven by economic self-interest and that party cues can be a rational decision-making strategy. But does citizens’ ability to assess their self-interest influence the sources of information they rely on and their policy choices? I hypothesise that financial and economic literacy influences the type of information individuals are responsive to, and ultimately, their economic policy preferences. Using a survey experiment on price controls in Italy, I manipulate whether citizens receive party cues or policy information. I show that financially and economically literate individuals are more likely to understand information concerning the costs and benefits of the policy under analysis, and to be responsive to it. This is not the case for financially and economically illiterate individuals, who are more receptive to party cues, even when such cues are misleading and lead them to support welfare-reducing policies.