The Economic Psychology of the Welfare State

Abstract: Political decision making can be analyzed through a plethora of theories. Here Economic Psychology is used as theoretical framework to analyze decision making, both by politicians and voters. The thesis consists of an overview of current research; an econometric study of how the voters in municipal elections react to changes in fiscal policy; and two case studies where the transfer of responsibility from one political level to another are studied, namely the transfer of Elder Care from counties to municipalities, and the transfer of the school system from the national government to the municipalities. It is shown that political actors often take psychological factors into consideration when they design or react to policy proposals. It is also shown the use of a psychological approach can improve the understanding of political decision making, particularly when the processes are complex or involve negotiations.