Galasso examines the impact of population ageing on local public spending

Vincenzo Galasso, Full Professor of Economics and Head of the Departments of Social and Political Sciences at Bocconi University, research unit director of Analysis in Pensions Economics (APE) of Baffi Centre, is also the principal investigator of “The impact of population ageing on preferences for local public spending” research project. We have asked him some questions about the project.

When have you started this research project?

The research project started in November 2023.

Who is funding this research project? 

Ministero Università e Ricerca (MUR) and PRIN financed within the Next Generation EU initiative are financing this project.

What are the research questions? 

The aim of this project is to empirically analyse the impact of ageing on local public policy. Specifically, we are interested in its effects on the composition of public spending at the municipal level. To do so, we will focus on Italy and collect data on municipal budgets and elections. We will first conduct a survey among mayors and citizens, which will allow us to identify and classify several categories of spending according to their target age group. Then, by using several econometric techniques, we will investigate whether population ageing biases the allocation of expenditures towards the older part of the population. As population ageing affects both the average age of politicians and the average age of constituents, we will consider the two dimensions separately. By focusing on close elections and using a regression discontinuity design, we will investigate whether politicians of different ages have different preferences with respect to the composition of public expenditures. Then, by exploiting differences in the characteristics of the constituency, in terms of age and share of retirees, and the implementation of several pension reforms, we will investigate to what extent the ageing of the electorate affects the choices of politicians engaged in strategic spending.

Why have you decided to investigate this topic? 

Current demographic trends in advanced and European countries show that young individuals will be soon outnumbered by older ones. Young adults today are the first generation to be poorer than the previous cohorts. This means that they represent an economically vulnerable and political minority in the population and this condition might be exacerbated by the evidence of a bias against the youth in several domains.

Moreover, younger individuals are those who suffer the most during economic recessions and who will be the most severely impacted by many current and future issues, such as climate change, low-birth rates and conflicts around the world. In theory, this would justify a larger voice of them in society’s deliberations over these issues. In practice, the larger representation of the elderly in the electorate and political arena means that the demand and supply of public policy are more likely to be affected by the preferences and needs of the older groups, who are likely to be not aligned with the younger ones.

How and to what extent does the ageing of the electorate and representatives affect public policy? What are the most affected types of spending? Answers to these questions are important in order to predict future trends in public policy expenditures and choices, which are likely to affect the well-being of the young population and the rate of inclusivity of all age groups in political institutions.

Why this topic matters for people? 

The results of this project will have important policy implications. The composition of public spending affects how societies respond to current and future challenges such as climate change, increased public debt, and low-birth rates, which are going to affect the well-being of our younger generations. By shedding light on this issue, we can help policymakers design the best response to these challenges.

Which data are you analysing? 

In this project, we shall apply state-of-the-art econometric techniques to the analysis of ageing, retirement and their consequences on public spending at the municipality level in Italy. For what it concerns the empirical analyses, our project will mix methodological ingredients from two complementary tools: those coming from data science and those included in the standard toolbox for causal inference design, such as regression discontinuity design and difference-in-differences.

Specifically, we will use municipal budget data for the period 2008-2020, which are publicly available from the website of the Ministry of Economic Affair (https://bdap-opendata.mef.gov.it/) for the period 2008-2020 as well as we will complement them for the period 2000-2007 by using web-scraping techniques on the website of the Italian Ministry of Interior, which is a publicly accessible repository. We will thus create a dataset of municipal budgets for the longest possible period (considering the publicly available data), which will include not only information on aggregated categories of spending but also detailed information on the division of the sources and spending designation.

Moreover, we will complement our dataset with local elections data available from the website of the Italian Ministry of the Interior. From the same source, we will also have access to a third publicly available dataset that has information at the politician level including name, gender, age, education, party affiliation, and occupation, among other variables (anagrafe degli amministratori locali).

What is the state of the project at the moment?

The data collection phase has been completed. We conducted two parallel surveys—one administered to a representative sample of Italian citizens and one to mayors of Italian municipalities—covering more than 4,000 citizens and around 400 mayors. The surveys focused on local public spending and policy preferences, with particular attention to environmental and transport-related policies, as well as beliefs about social norms and political support.

We are currently analysing the data, and the preliminary results are very promising. Early evidence shows sizable gaps between citizens’ and mayors’ beliefs about public support for climate policies, as well as systematic misperceptions regarding others’ willingness to contribute financially. Importantly, correcting these misperceptions through information treatments has significant effects on willingness to pay and support for local environmental spending, especially among mayors and younger respondents.Is there any conclusion that you can share regarding your research? 

Is there any conclusion that you can share regarding your research? 

Using our survey data on Italian citizens and mayors, we uncover several clear and policy-relevant findings. First, both citizens and local policymakers substantially underestimate the public’s willingness to support and finance climate policies, particularly at the local level. These misperceptions are large and systematic, and they appear among mayors as much as among the general population.

Second, correcting these misperceptions matters. Providing information about others’ behavior (willingness to pay) increases citizens’ and mayors’ willingness to contribute financially to climate action, while information about social norms (“what people think should be done”) is especially effective in shaping mayors’ preferences for local environmental spending. In particular, both treatments significantly raise support for increased municipal environmental expenditure among mayors, with effects that are economically large relative to baseline support levels.

Third, we find important heterogeneity by age. Younger citizens and younger mayors are consistently more responsive to information treatments, especially with respect to willingness to pay and support for local policies. This suggests that population ageing may indirectly shape public spending choices by dampening responsiveness to pro-climate norms and information, even in contexts where overall support for environmental action is high.

Finally, despite this age gradient in preferences and responsiveness, both citizens and mayors tend to frame environmental spending as benefiting the whole population, with limited recognition of its disproportionate long-term benefits for younger cohorts. This disconnect between actual distributional effects and public narratives may further contribute to biases in local public spending decisions as societies age.

Taken together, our results suggest that population ageing affects local public policy not only through electoral composition, but also through beliefs, narratives, and information frictions that shape how both voters and policymakers perceive political feasibility and public support.