A Reduced-Form Approach to Behavioral Public Finance

Sendhil Mullainathan, Joshua Schwartzstein () and William J. Congdon ()
Additional contact information
Joshua Schwartzstein: Department of Economics, Dartmouth College, Hanover, New Hampshire 03755
William J. Congdon: Brookings Institution, Washington, DC 20036

Annual Review of Economics, 2012, vol. 4, issue 1, 511-540

Abstract: Research in behavioral public finance has blossomed in recent years, producing diverse empirical and theoretical insights. This article develops a single framework with which to understand these advances. Rather than drawing out the consequences of specific psychological assumptions, the framework takes a reduced-form approach to behavioral modeling. It emphasizes the difference between decision and experienced utility that underlies most behavioral models. We use this framework to examine the behavioral implications for canonical public finance problems involving the provision of social insurance, commodity taxation, and correcting externalities. We show how deeper principles undergird much work in this area and that many insights are not specific to a single psychological assumption.

Keywords: behavioral economics; taxation; social insurance; externalities (search for similar items in EconPapers)
JEL-codes: B40 D01 D03 D04 D60 D61 H00 H20 I10 I30 J65 Q50 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (85)

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