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Risk, Uncertainty and Constitutional Change

Funder: Economic and Social Research Council
Amount: c. £300,000 (our component of a larger multi-million pound grant)
Behavioural Science Centre Member: Professor Liam Delaney (CI)
Other Researchers: David Bell (PI)

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This project aims to investigate how alternative perspectives of Scotland’s future tax structure interact with individual attitudes to risk, uncertainty and time to affect attitudes to constitutional change. The possibility that Scotland leaves the UK presents a unique opportunity to apply behavioural economics to a major constitutional issue. Experimental observations show that individuals frequently deviate from the standard expected utility model when confronted with uncertainty. Theory is also of little value in estimating individual rates of time preference. Finally, individuals may respond differently when confronted by uncertainty (unknown probabilities) as opposed to risk (known probabilities). This is known as ambiguity bias. The 2014 referendum presents a unique opportunity to study the issue of loss aversion, ambiguity aversion, rates of time preference and status quo bias outside the lab. Given the SSAS evidence of the importance of changes in wealth on how people are likely to vote, this analysis will survey individuals to determine the extent to which attitudes to constitutional change are influenced their personal characteristics with respect to risk, uncertainty and time preference. The empirical aspects of this survey will be covered by YouGov polls. There is a representative panel of around 1000 people living in Scotland that are surveyed weekly by YouGov. We intend to present this panel with a number of tax options for Scotland and use validated instruments to determine attitudes to risk, uncertainty and time preference in the context of future tax structures. We will also gather data on attitudes to independence. We will analyse the results to determine the extent to which these attitudes reflect differences in individual characteristics and to beliefs about tax levels should Scotland become independent. We would seek to verify our findings using 3 focus groups.

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