Targeting poorer voters would have maximized the economic benefits of Italy’s stimulus payments, but politicians favored middle-income voters who were more likely to reward them at the polls.

Governments frequently issue stimulus payments during economic downturns. Economic theory suggests that stimulus payments should be timely, targeted, and temporary, but elected officials usually decide whether to adopt or repeal these programs; thus, political considerations are likely to influence their design and lead to suboptimal policy choices. For example, Congress authorized the first stimulus checks during the COVID-19 pandemic, but they were issued with President Trump’s signature, causing many voters to associate the payments with him personally. A week before Election Day, former President Barack Obama publicly highlighted this fact, encouraging voters not to give President Trump credit. This example raises two questions: Do voters reward politicians for payments? And if so, do electoral incentives lead politicians to distribute payments to groups most likely to respond at the polls, potentially at the cost of economic efficiency?

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