Monetary Incentives to Vote: Evidence from a Nationwide Policy

• In Event: Taxation, Political Economy, and Voter Turnout

Abstract

In this paper, we study voters’ response to government-provided monetary incentives for turnout in Peru along several margins. Voting has been compulsory in Peru for many decades. Until 2006, the electoral abstention fine was homogeneous for all citizens in all districts. Following that year's national election, a reform was implemented. Districts were classified into three categories according to their poverty level: non-poor, poor and extreme poor. The value of the fine was reduced in all districts, but the magnitude of the reduction varied depending on the category, with poorer districts enjoying a larger decrease. This reform provides plausibly exogenous variation in the value of the fine, which we combine with administrative data from national elections over a 16-year period.

Using a difference-in-difference strategy, we find that a larger fine for abstention leads to higher voter turnout. We estimate an average marginal increase of 0.5 percentage points (pp) for a 10 Peruvian Sol [S/] hike (approximately US$3), but this average masks important dimensions of heterogeneity. We observe that the marginal effect of the fine is more than three times as large in 2016 than in 2011, indicating gradual and substantial adaptation over time. We also observe that the effect of a larger fine is not uniform across different types of elections.

The observed increase in voter turnout in response to a larger fine can be decomposed into potentially separate effects on the decision to vote (the numerator) and the decision to register to vote (the denominator). Voter registration is automatic in Peru and people are legally required to vote in their district of residence, which they can adjust by changing the address on their national identification card (DNI). Our second finding shows that a S/10 increase in the value of the fine leads to a 1% decrease in voter registration. We argue that voters are strategically changing their address of registration in order to avoid paying a larger fine. We provide further evidence of irregularities by showing that the rise in registration is only present for younger voters and mostly driven by first-time voters with ages between 18 and 20, who must obtain a DNI for the first time and can report a fraudulent address at a very low cost.

Naturally, the interpretation of the marginal effects of the fine must take into account the probability of enforcement. Between 2011 and 2016 there was an improvement in settlement of fines that is related to measures taken by the national government after 2011. These measures mostly targeted a set of predominantly non-poor districts, but this was fortuitous as the renewed effort at enforcement did not deliberately incorporate the poverty categories determining the value of the fine. Leveraging variation in targeting, we show that the increase in enforcement can account for no more than 20% of the observed long-run marginal effect of the fine on voter turnout.

We also document a sophisticated and heterogeneous response to the changing value of the abstention fine by people that are actually fined. Outstanding fines can be settled either by paying the corresponding amount or by submitting a claim for an excuse based on health reasons, death of a relative, etc. The processing fee for an excuse is equal to the value of the fine for the extreme poor category after the reform, but the transaction cost is arguably lower. We show that as the value of the fine increases, debtors in the extreme-poor category respond by paying less, while those in the other categories respond by increasingly submitting claims for excuses.

Overall, our results provide evidence of a sophisticated and multi-dimensional response by Peruvian voters to the incentives provided by the reform to the abstention fine. We hypothesize that such a response requires the acquisition of information on the relevant institutional details. To examine this hypothesis, we construct a monthly panel of queries in the Google search engine related to 44 different search terms. Using a complementary difference-in-difference research design, we show that the relative frequency with which people in Peru search the internet for information about the fine increases disproportionately after the reform.

To gauge the contribution of the value of the fine to the aggregate effect of compulsory voting, we use rich data at the `voting-table' level and leverage idiosyncratic variation at this level in the age composition of the electorate in the 2016 elections. Our novel empirical strategy exploits the fact that citizens above the age of 70 are exempt from the mandate to vote, and so we compare turnout in voting tables with a higher share of 70 year-old voters to those with a higher share of people aged 69. A back-of-the-envelope calculation using our elasticity estimates for the 2016 elections yields that the monetary incentive explains roughly 50% of the aggregate effect of compulsory voting.

Authors

• Mariella Gonzales, University of Chicago

• Gianmarco Leon, Universitat Pompeu Fabra

• Luis R Martinez, University of Chicago