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Time delay, complexity and support for taxation

Silvia Tiezzi and Erte Xiao ()

Journal of Environmental Economics and Management, 2016, vol. 77, issue C, 117-141

Abstract: People often experience the benefits of taxation over time. We design an intertemporal market experiment with negative externalities to examine how delaying the benefits of taxation affects support for taxes. We find that when negative externalities occur immediately, people learn to adopt Pigouvian taxes, which are aimed at reducing negative externalities and restoring market efficiency. By contrast, when negative externalities are delayed, people are less receptive to taxation. This effect persists over time. Our data reveal that the strong negative delay effect can be explained in large part by narrow bracketing and the increased perceived complexity of the environment, rather than by time discounting per-se. We argue and demonstrate that increasing the transparency of intertemporal tradeoffs can effectively promote support for taxation.

Keywords: Lab experiments; Externalities; Support for taxation; Intertemporal choice (search for similar items in EconPapers)
JEL-codes: D03 D62 D72 H23 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.jeem.2016.03.002

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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