Tax Policy and Public Macroeconomic Expectations: Experimental Evidence from the UK

Last registered on March 18, 2025

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Pre-Trial

Trial Information

General Information

Title

Tax Policy and Public Macroeconomic Expectations: Experimental Evidence from the UK

RCT ID

AEARCTR-0015395

Initial registration date

February 16, 2025

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

February 20, 2025, 5:59 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated

March 18, 2025, 7:24 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Country

United Kingdom of Great Britain and Northern Ireland

Region

Primary Investigator

Name

Yuying Wu

Affiliation

UNIVERSITY OF BIRMINGHAM

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Pei Kuang

PI Affiliation

University of Macau

Contact Investigator

PI Name

Kaushik Mitra

PI Affiliation

University of Birmingham

Contact Investigator

Additional Trial Information

Status

In development

Start date

2025-03-01

End date

2025-09-01

Keywords

Behavior

Additional Keywords

Belief formation, macroeconomic expectations, tax policy

JEL code(s)

Secondary IDs

Prior work

This trial does not extend or rely on any prior RCTs.

Abstract

Economic theory suggests that fiscal policy shapes public expectations by influencing perceptions of future economic conditions. This study employs a randomized survey experiment to examine how individuals adjust their macroeconomic expectations in response to tax policy changes. How do variations in tax magnitude, policy justification, and announcement timing affect belief formation? Do different income groups respond differently to tax increases in forming expectations? By exploring these mechanisms, the study provides insights into how policy establishment and communication influence economic sentiment and forward-looking decision-making.

External Link(s)

Registration Citation

Citation

Kuang, Pei, Kaushik Mitra and Yuying Wu. 2025. "Tax Policy and Public Macroeconomic Expectations: Experimental Evidence from the UK." AEA RCT Registry. March 18. https://doi.org/10.1257/rct.15395-2.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

Intervention (Hidden)

Respondents are randomly assigned to a control group or one of three treatment groups.
Control group: There is no additional information provided to the respondents.
While the treatment groups are presented with different policy scenarios regarding a proposed tax increase. Respondents in the treatment groups receive information about a planned increase in the income tax rate for higher-rate taxpayers under varying conditions:
Treatment 1: The government announces a long-term policy change to increase the income tax rate for higher-rate taxpayers by 1%, set to take effect in one year.
Treatment 2: The same information as Treatment 1 is provided, with an additional statement that the revenue from the tax increase will be allocated to military spending.
Treatment 3: The same information as Treatment 1 is given, but the tax rate increase is 5% instead of 1%.
After receiving this information, respondents provide macroeconomic forecasts and explain their reasoning.

Intervention Start Date

2025-03-17

Intervention End Date

2025-04-04

Primary Outcomes

Primary Outcomes (end points)

The macroeconomic expectations of the UK public, including expectations of inflation, bank rates, GDP growth, the debt-to-GDP ratio, and the fiscal deficit.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

This study investigates how tax policy changes influence public expectations of macroeconomic indicators using a structured survey and a randomized experimental design.
First, participants answer a series of questions to elicit their prior expectations about macroeconomic conditions.
Next, participants are randomly assigned to different groups. Except for the control group, each group is exposed to distinct policy scenarios regarding an announced tax rate increase. Some receive information about the tax policy change with varying magnitudes, while others are provided with additional contextual details, such as the purpose of the tax increase.
Following the information intervention, participants update their forecasts for macroeconomic indicators and answer additional questions related to taxation. They are also asked to explain their reasoning, helping to analyze the mechanisms through which tax policy changes shape public expectations. In addition, participants report expected changes in their savings and consumption behaviors, allowing us to examine the broader economic implications of tax policy adjustments.

Experimental Design Details

This experiment employs a randomized controlled design to examine how tax policy changes influence public expectations of key macroeconomic indicators.

Pre-Treatment Measures
Before any policy intervention, participants first provide their prior expectations regarding key macroeconomic variables, including inflation, interest rates, GDP growth, debt-to-GDP ratio, and deficit levels. These forecasts are elicited for two different time horizons: one year and three years into the future.
Next, participants answer a series of questions assessing their trust in government. This section includes measures of political affiliation and their confidence in government policies, allowing us to analyze whether political beliefs shape expectation formation in response to tax policy changes.

Information Treatment
Participants are then randomly assigned to one of four groups: a control group, which receives no information about tax policy, and three treatment groups, each of which is exposed to a different tax policy scenario. Some treatment groups receive information about a tax rate increase of different magnitudes, while others are provided with contextual details explaining the purpose of the tax increase.

Post-Treatment Measures
After receiving the intervention, participants update their forecasts for the same macroeconomic variables as in the pre-treatment phase. In addition to macroeconomic expectations, participants are also asked about their personal financial behaviors, including expected changes in savings and investment decisions.
To better understand the mechanisms behind expectation formation, respondents are further asked to explain their reasoning for their updated forecasts. Additionally, participants answer tax-related questions, designed to assess how their beliefs about taxation shape their broader economic outlook.

Demographic Information
Finally, participants complete a demographic questionnaire, collecting details on age, income, education, employment status, and other socioeconomic factors.

Randomization Method

Randomization will be conducted by a computer algorithm.

Randomization Unit

individual

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

individual

Sample size: planned number of observations

Approximately 3,200–4,000 respondents in total.

Sample size (or number of clusters) by treatment arms

Control group: 800-1,000 respondents
Treatment group 1: 800-1,000 respondents
Treatment group 2: 800-1,000 respondents
Treatment group 3: 800-1,000 respondents

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB