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Peer effects in public support for Pigouvian taxation

Lingbo Huang and Erte Xiao ()

Journal of Economic Behavior & Organization, 2021, vol. 187, issue C, 192-204

Abstract: Despite the efficacy of Pigouvian taxes, governments often find them surprisingly controversial to implement. Evidence suggests the reason may be their complexity, which stems from the delay of externality. This paper studies whether communication among peers can promote public support for Pigouvian taxation. Using a market experiment with time-delayed negative externalities, we find that support for Pigouvian taxation increases when tax supporters can explain their position to other voters. We show that the peer effects cannot be explained by simple imitation or compliance, but are more likely to be driven by social learning. Our findings provide converging evidence for the role of complexity in the lack of support for Pigouvian taxes. These results point to the importance of giving voice and visibility to members of the general public who support efficient but complex tax policies.

Keywords: Market experiment; Pigouvian taxation; Negative externality; Peer effects; Vote (search for similar items in EconPapers)
JEL-codes: D03 D62 D72 H23 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jebo.2021.04.019

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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