Subjective Congruence for Public Expenditure: A Political Transactions Cost Approach

Previous public choice literature has paid little attention to individuals' own perspective on public resource allocation. Their subjectivity, however, provides a useful proxy for experienced utility for public goods and services. I examine the subjective evaluation that individuals make by looking at the psychological distance between their preferred and perceived public expenditure, which I call subjective congruence, in four policy areas: education, health, pensions, and unemployment benefits. My dissertation is an effort to understand the determinants of subjective congruence within a transaction cost politics framework.;I focus on the perceptual determinants of subjective congruence that go beyond self-interest and political ideology that are polarizing rather than compromising factors among citizens. Extant research in economics and political science offer the individual's self-interest and political ideology as the main factors that determine policy support or policy satisfaction. I argue that subjective congruence is strongly driven by perceptual factors such as effective public service delivery, political trust, and procedural fairness because these perceptual factors reduce political transactions costs that collective decisions impose on individuals in public life.;In the first part of my dissertation, I examine what makes for variation of subjective congruence across countries. Using a cross-national analysis on 57 countries, I find evidence that regime type and political institutions per se do not systematically explain cross-country differences in subjective congruence and that the reduction of political transactions costs has a larger substantive effect on increasing subjective congruence under democracies than under autocracies. I then examine the perceptual factors that affect subjective congruence at the individual level. Using a hierarchical model with cross-national survey data, I find statistically significant and substantially larger effects of political trust and procedural fairness on subjective congruence than the effects of self-interests and of political ideology.;My findings show how conflicting interests and heterogeneous preferences for public resource allocation can reach a workable consensus in a democracy, an outcome that standard models focusing only on individual self-interest hardly explain. The topic is important because individual perception drives public attitudes and behaviors toward tax payments, redistribution, and political participation.