The complementarity of low taxes and pro -social guidelines when polluters have moral preferences

Marcelo Caffera, Carlos Chávez, James Murphy, Juan Briozzo and Carolina López

No 2501, Documentos de Trabajo/Working Papers from Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo.

Abstract: We present the results of a series of public-bad laboratory experiments in which we assess whether a salient message suggesting pro-social behavior with an implicit moral appeal, and a tax that is insufficient to induce the optimal level of the externality, can complement each other when implemented jointly. Our results suggest that, on average, (a) behavior is consistent with subjects having moral preferences, (b) a salient message suggesting pro-social behavior can be effective, (c) preferences are nonseparable from the choice of instrument (i.e, the tax crowds-out part of the subjects´ moral preferences), and crucially, (d) the tax and the informative message do not complement each other. The tax has a greater impact on reducing the externality than the prosocial guideline, even though the tax was only half of that needed to reach the socially optimal level. Nevertheless, when implemented together, the total effect of both instruments is similar to that of the tax alone. This result is stronger for those subjects that are more “nudgeable†by the prosocial guideline. These results challenge the policy recommendation that nudges can effectively complement low taxes while awaiting the political will to raise them.

Keywords: Economic experiment; nudge; prosocial guideline; public bad; tax. (search for similar items in EconPapers)
JEL-codes: C91 H23 Q52 Q58 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-exp and nep-pbe
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Working Paper: The complementarity of low taxes and pro-social guidelines when polluters have moral preferences (2025)
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