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Political consequences of (consumer) debt relief

Author

Listed:
  • Aidt, Toke
  • Asatryan, Zareh
  • Badalyan, Lusine
Abstract
Many governments operate consumer debt relief programs, often timed to match the election cycle, but their political effects are not well understood. We ask if debt relief can influence elections in democracies. Our motivating exercise is the Biden administration's promise to relieve student debt. We utilize quasi-experimental variation generated by another very large debt relief program enacted in the Republic of Georgia that, similar to USA, affected every sixth voter. We estimate that the program helped the incumbent candidate win that election, and that its effects persisted. Overall, we show how economic power can translate into political power in democracies.

Suggested Citation

  • Aidt, Toke & Asatryan, Zareh & Badalyan, Lusine, 2024. "Political consequences of (consumer) debt relief," ZEW Discussion Papers 24-030, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:300009
    as

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    File URL: https://www.econstor.eu/bitstream/10419/300009/1/1893923738.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Consumer debt relief; US student debt; distributive politics; vote buying; elections;
    All these keywords.

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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