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April Blue Bag Lunch Talk
Click here by 12PM on April 6 to RSVP
With sovereign debt soaring, the issues of "how much debt is too much debt" and "what to do about it" are likely to move once again from the technocratic realm of "quiet politics" into the electoral realm of "loud politics". Professor Cavaille extends our understanding of the demand side of fiscal policy by mapping the constraints (if any) that voter impose on policymakers in this policy realm. Cavaille and her collaborator's study have in mind three types of constraints: 1) the existence of an issue public, 2) persistent as opposed to malleable concerns over debt (un)sustainability, 3) a shared mental model regarding the consequences of unstainable debt levels for inflation, growth, taxation and social spending.

Specifically, deficit and debt-friendly policy makers are more constrained (and fiscal conservatives less so) if they face an issue public (a plurality who strongly cares about low deficits and debt), cannot easily manipulate people’s beliefs about debt (un)sustainability and are worried about behavioral responses to high debt levels (including inflation or tax expectations). Using an original data collection effort in Great Britain, there is little evidence found to support the existence of such constraints. Professor Cavaille will discuss implications for future research, including the need to shift to elite-centric research designs.
The Center on Finance, Law & Policy’s “blue bag lunches” aim to foster interdisciplinary collaborations and showcase the work being done at the University of Michigan on issues related to finance, law, and policy. Faculty and graduate students are welcome to present research related to finance, law, and policy at any stage at these monthly events – from general questions and ideas, to works-in-progress, to published work.

Blue Bag Lunches are generally held on the first Thursday of each month from Noon – 1:00 p.m.
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