When Incentives and Nudges Meet: Promoting Budget Allocations for Undervalued Policies

Abstract

Budget officers often assess public project proposals based on available financial support and expected outcomes. However, behavioral factors such as time discounting and psychological hesitation may lead to underinvestment in programs with delayed but significant benefits. This study investigates whether financial incentives and non-financial nudges can influence budgetary decisions in local governments. We conducted a nationwide mail-based survey experiment targeting budget officers in Japanese municipalities and received 490 valid responses. Using a 2*2 randomized design, we tested the independent and combined effects of a financial incentive (a 50% national subsidy) and a non-financial nudge (loss framing and peer information). All three treatments significantly increased assessed budget amounts compared to the control group. The largest effect appeared in the combination group (approximately 1.1 million JPY higher, p < .01). Both the financial incentive and the nudge independently increased assessments by approximately 650,000-670,000 JPY (p < .01). Notably, only the nudge raised the self-financed portion of the budget. These findings demonstrate how low-cost behavioral interventions can improve budget assessments for undervalued projects. As an application, we embedded the experiment in a case involving HPV vaccine promotion in Japan, but the approach can be broadly relevant to other public policy domains requiring forward-looking budget decisions.