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Can Small Incentives Have Large Effects? The Impact of Taxes versus Bonuses on Disposable Bag Use

Tatiana A. Homonoff

American Economic Journal: Economic Policy, 2018, vol. 10, issue 4, 177-210

Abstract: This paper examines a simple element of financial incentive design—whether the incentive takes the form of a fee for bad behavior or a reward for good behavior—to determine if the framing of the incentive influences the policy's effectiveness. I investigate the effect of two similar policies aimed at reducing disposable bag use and a five-cent tax on disposable bag use and a five-cent bonus for reusable bag use. While the tax decreased disposable bag use by over forty percentage points, the bonus generated virtually no effect on behavior. These results are consistent with a model of loss aversion.

JEL-codes: D12 D91 H23 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/pol.20150261
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