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?

My research explores the electoral effects of the so-called 80 Euro Bonus, Italy’s largest stimulus payment program ever adopted. The Democratic Party of Italy enacted the program in April 2014 as one of its first policy measures. The program’s stated goal was to stimulate spending and support the lower-middle class in the aftermath of a prolonged recession that began in 2011. Initially adopted as a temporary measure for 2014, the bonus was made permanent in 2015 and has been maintained by all five successive governments since then.

The original program entailed a monthly payment of €80 (approximately $100 at the time) for all employees (excluding the self-employed) with a gross annual income between €8,145 and €26,000. At the time, median individual income was around €16,000, so the program targeted mostly middle-income workers. Employers were required to determine eligibility and credit the bonus in paychecks. Thus, the payments were automatic and salient: Any eligible workers receiving the bonus could see it on their monthly paycheck as a distinct entry. Over 10 million employees—20 percent of the voting-eligible population—received the bonus. Payments began at the end of May 2014, the week of the national elections for the European Parliament. This unique timing allowed me to isolate the electoral effects of the payments from other policies that might have influenced voters.

I combined administrative data on the number of bonus recipients, the income and employment distributions, and electoral records for all Italian municipalities between 2008 and 2019. My research compares the Democratic Party’s electoral performance over time in municipalities with many bonus recipients with its electoral performance in municipalities with relatively few recipients among the voting-eligible population. Because Italy has a proportional electoral system, national politicians try to maximize their party’s national vote share rather than their vote shares in individual municipalities. This addresses concerns that politicians may have designed the program to influence voters in certain municipalities, bolstering the reliability of my findings.

My research finds that the bonus yielded large electoral rewards for the Democratic Party. A 1 percentage point increase in the proportion of recipients increased the party’s vote share by 0.18 percentage points. In the average municipality, 20.15 percent of the voting-eligible population received the stimulus, so the program increased the party’s vote share by around 4 percentage points in 2014 relative to 2013. This corresponds to 35 percent of the total change in the Democratic Party’s performance between the 2013 elections (27 percent of votes) and the 2014 elections (40.8 percent). Additionally, I reviewed survey responses from voters interviewed in 2014, less than a month before and after the first payments were disbursed. These responses demonstrate that voters who were eligible to receive the payments were substantially more likely to switch their support to the Democratic Party.

These electoral rewards persisted for five years and remained during the 2019 elections, the last year in my data, when the Democratic Party’s vote share was 0.09 percentage points higher in places with more recipients. This is a striking finding, considering that the prime minister who adopted the policy, Matteo Renzi, resigned in 2016 and that the Democratic Party was voted out of the government in 2018. This finding also suggests that voters correctly attributed credit to the party that benefited them, which differs from prior research on other countries.

Overall, the persistence of the electoral rewards helps explain why a temporary stimulus policy became a permanent benefits program. Furthermore, my research shows that voters responded not only to receiving payments but also to having them unexpectedly withdrawn. The government mistakenly paid the bonus to 1.5 million people who later had to repay it when filing taxes. After receiving the bonus, this group mildly increased their support for the Democratic Party, but their support dropped significantly after the government enforced repayment. This finding highlights the political risks of repealing government benefits and helps explain why temporary programs often become politically irreversible.

Although the stimulus payments increased the Democratic Party’s vote share, they largely failed to boost the economy: Recipients spent about half the bonus and saved the rest. This limited spending response may be due to the policy’s poor targeting. More than 25 percent of non-self-employed workers earned less than €10,000 in 2014 but were mostly excluded from the policy. Other research shows that spending responses could have been significantly higher had the stimulus targeted workers with the lowest income, which aligns with findings on the COVID-19 fiscal stimulus in the United States.

Why did politicians choose not to target people who would have spent the highest percentage of the stimulus? Two findings suggest that the answer involves electoral incentives. First, electoral effects were smaller in municipalities with poorer recipients and significantly larger in municipalities where recipients were closer to the middle of the income distribution. Second, the Democratic Party faced only a minor electoral penalty in municipalities with a high share of voters below the income eligibility range. However, the party faced much stronger backlash in municipalities with a high share of voters whose incomes exceeded the eligibility range.

Taken together, these findings indicate that stimulus policies are more likely to influence voters with higher incomes. Furthermore, voters are more driven by whether they personally received a payment than by the broader economic benefits of stimulus programs. Thus, my research highlights a fundamental tension between political and economic efficiency. While targeting poorer voters would maximize the economic benefits of payments, electoral incentives push politicians to favor middle-income voters who are more likely to reward them at the polls. This tension helps explain why the design of stimulus policies is often economically suboptimal.

Finally, I quantified the trade-off between economic and political incentives by analyzing a hypothetical policy that shifted the income eligibility range from €8,145–€26,000 to €0–€20,000. This alternative design maintains the same cost and total number of recipients but redirects benefits toward those who will likely spend more of it. My research finds that this policy would have reduced the Democrats’ electoral returns by at least 15 percent, but the Bank of Italy estimates that it would have been 30 percent more effective at increasing spending. This implies that for each percentage point of electoral advantage that politicians sacrifice, they can increase the effectiveness of stimulus programs by 2 percentage points.

Note:
This research brief is based on Silvia Vannutelli, “The Political Economy of Stimulus Transfers,” National Bureau of Economic Research Working Paper no. 33973, June 2025.