Behavioral Public Economics

B. Douglas Bernheim and Dmitry Taubinsky

No 24828, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This chapter surveys work in behavioral public economics, emphasizing the normative implications of non-standard decision making for the design of welfare-improving and/or optimal policies. We highlight combinations of theoretical and empirical approaches that together can produce robust qualitative and quantitative prescriptions for optimal policy under a range of assumptions concerning consumer behavior. The chapter proceeds in four parts. First, we discuss the foundations and methods of behavioral welfare economics, focusing on choice-oriented approaches and the measurement of self-reported well-being. Second, we examine commodity taxes and related policies: we summarize research on optimal corrective taxes, the efficiency costs of sales taxes that are not fully salient, the distributional effects of sin taxes, the use of non-price policies such as nudges, the tax treatment of giving, and luxury taxes. Third, we examine policies affecting saving, including capital income taxation, commitment opportunities, default contribution provisions for pension plans, financial education, and mandatory saving programs. Fourth, we detail the manner in which under-provision of labor supply and misunderstandings of policy instruments impact optimal labor income taxation and social insurance. We close with some recommendations for future work in behavioral public economics.

JEL-codes: H0 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-fle, nep-hap, nep-lma and nep-pbe
Note: AG LE PE
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