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Why people want something for nothing: The role of asymmetrical illusions

This article examines if and why mechanisms exist at the individual citizen level that may contribute to public sector growth – and whether such mechanisms can be altered through provision of information about the costs of public services. We test and find empirical support for the theory of fiscal illusion according to which citizens underestimate the costs of public services and therefore demand more public spending than if they had been fully informed. We also develop and find empirical support for a theory of asymmetrical illusions. This theory claims that producers and users of public services are more spending-minded than ordinary taxpayers – and that limited rationality contributes to this difference. However, the provision of informationabout the unit costs of public services can weaken these mechanisms of fiscal illusion and asymmetrical illusions. The test is based on tabular, logit, and experimental analysis of survey data from Odense, a Danish city with 175,000 inhabitants.