In the first chapter, I measure the effects of street-level political advertising on voting behavior. I use a novel dataset on ad location in a major Spanish city during elections for the national parliament as well as granular socio-economic and voting data. This set-up, where more than two parties are running for office and elections are very competitive, allows me to explore the heterogeneous effects of ads across parties as well as how parties' ads affect other parties' vote shares. To identify the effects of parties' ads, I exploit a legally mandated randomized assignment of ad location to parties across multiple years. I find that a party's own ads have a positive effect on its vote share, although the effects are heterogeneous across parties. A one standard deviation increase in the number of ads increases a party's vote share by 0.79 percentage points on average. Ads of parties with ideologically distant platforms consistently have a negative effect on a party's vote share. In contrast, ads of parties that are close competitors may act either as complements or substitutes in different years. The second chapter analyses the effects of an economic shock on the emergence of new parties and other changes in voting parties by using regional variation in the exposure to the shock. I find that a worsening of economic conditions as measured by unemployment rate leads to an increase in electoral competition and volatility. In particular, the deeper the effects of the recession in a area, the larger the number of new parties emerge and become more successful and there is an increase in the changes in vote shares. On the other hand, the vote share of parties previously in government decreases and a decrease in vote share concentration. The third chapter is a co-authored works where we present experimental evidence establishing that the level of incentives affects both gameplay and beliefs. Holding fixed the actions of the other player, we find that, in the context of dominance-solvable games, higher incentives make subjects more likely to best-respond to their beliefs. Moreover, higher incentives result in more responsive beliefs but not necessarily less biased. We provide evidence that incentives affect effort and that it is effort, and not incentives directly, that accounts for the changes in belief formation. The results support models where, in addition to choice mistakes, players exhibit costly attention.

Borrowing money is a core instrument of governments to fund goods with high front costs andlong-term benefits. Scholars have, however, primarily associated public debt with shortsighted policies by office-seeking politicians. The three essays in this dissertation investigate the determinants and outcomes of popular preferences for investment-oriented public debt using novel voting, survey, and budgetary data. The first essay asks: Is a community more amenable to borrowing when its time horizon shortens?Existing theories argue that individuals with shorter time horizons, like seniors, have a higher inclination towards borrowing because they overvalue current consumption and discount future costs. I verify this assumption by studying how population aging affects support for debt-funded investments. Using novel data sets on U.S. state and local bond referendums over six decades, I show that, conversely, aging decreases support for debt-funded investments. Contrary to mainstream predictions, an original conjoint survey experiment further demonstrates that seniors do not have a greater preference for policies with longer repayment maturities and shorter benefit periods. Rather, aging lowers support for investments by increasing fiscal conservatism and shifting consumption away from capital-intensive goods. The effect of aging varies depending on which age groups cohabit with seniors. In particular, aging communities experiencing an influx of nonrelative children show greater opposition to new investments, while increased contact with relative children has no detectable effect on their support for investments. These findings suggest that population aging can complicate the construction of political coalitions over investments, particularly in communities with diverse age distributions. The second essay inquires: Do popular preferences affect how governments fund policies? Policy funding is often presented as technical and hardly influenced by voters. I study this assumption by investigating the effect of population aging on U.S. municipal budgets between 1970 and 2017 with the use of data on municipal finances and mayors’ characteristics. In contrast, I find that aging increases appetite for consumption-oriented policies, leading to more short-term budgeting. When a municipality’s population ages, it substitutes current expenditures for capital spending, shortens its debt maturity, and favors liquid revenues over long-term borrowing. Ultimately, this translates into lower indebtedness and higher property tax revenues. In contrast, its expenditure levels and distribution between policies remain stable as seniors’ fiscal conservatism constrains surges in spending, and seniors’ interest in property values limits cuts in municipal amenities. The effects of aging are not uniform, as municipalities ruled by elderly mayors implement debt policies more aligned with seniors’ preferences. These results contradict the dire budgetary predictions associated with aging and show that seniors’ ideological and economic motives can counterbalance their distributional demands. They also illustrate that the preferences of minorities are better represented when they elect politicians who resemble them. The last essay questions: Do voters care about how a policy is funded? Even if citizens can grasp the technicalities of public finances, policy funding may still not matter to them. Indeed, the Ricardian equivalence argues that people are indifferent about whether a policy is funded by debt or taxation because they internalize the future costs of debt repayment in their bequests. Using a novel dataset of 22,000 local referendums and two original conjoint survey experiments, I demonstrate that, conversely, voters prefer financing policies by small tax increases rather than borrowing. My surveys also reveal that respondents discriminate against policies with longer repayment periods. This result contradicts both the Ricardian equivalence’s assumption that people are indifferent to how policies allocate costs over time and the premise that people overlook future borrowing costs. Time preferences are important to explain opinions regarding debt and taxation, as each funding method distributes costs and benefits differently over time. Specifically, people’s resistance to long repayment periods lowers support for debt-funded projects. Variations in preferences between debt and tax remain after accounting for their temporal differences. My analyses indicate that preferences do not vary by policy content or relative to personal financial investments, although conservative individuals display greater support for borrowing than liberals.