EconPapers    
Economics at your fingertips  
 

Understanding Public Support for Externality-Correcting Taxes and Subsidies: A Lab Experiment

David Heres, Steffen Kallbekken () and Ibon Galarraga ()

No 2013-04, Working Papers from BC3

Abstract: The potential of taxation to correcting environmental externalities has been long recognized among economists. Yet, this welfare-enhancing policy commonly faces strong opposition by citizens. Conversely, externality-correcting subsidies frequently enjoy high levels of public acceptance. We conduct a lab experiment to explore public support for Pigouvian taxes and subsidies. In an experimental market with a negative externality, participants vote on the introduction of Pigouvian taxes and subsidies under full or partial information concerning how the tax revenues will be spent and the subsidy paid for. Theoretically the two instruments should produce identical outcomes. We find substantially greater support for subsidies than taxes. This can partially be explained by the expectation that the subsidy will increase payoffs more than a tax, but not because it could be more effective in changing behavior. Furthermore, we find that under partial information, the preference for subsidies is even stronger.

Keywords: Pigouvian taxes; subsidies; lab experiment; public policy; revenues; effectiveness (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-cdm, nep-env, nep-exp, nep-pbe, nep-pub, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published

Downloads: (external link)
http://www.bc3research.org/index.php?option=com_wp ... 2&repec=1&Itemid=279
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.bc3research.org/index.php?option=com_wpapers&task=downpubli&iddoc=62&repec=1&Itemid=279 [301 Moved Permanently]--> https://www.bc3research.org/index.php?option=com_wpapers&task=downpubli&iddoc=62&repec=1&Itemid=279)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bcc:wpaper:2013-04

Access Statistics for this paper

More papers in Working Papers from BC3
Bibliographic data for series maintained by Sergio Henrique Faria ().

 
Page updated 2020-11-23
Handle: RePEc:bcc:wpaper:2013-04