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A Reduced-Form Approach to Behavioral Public Finance

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Author Info

  • Sendhil Mullainathan

    ()
    (Department of Economics, Harvard University, Cambridge, Massachusetts 02138, and Consumer Financial Protection Bureau, Washington, DC 20552)

  • Joshua Schwartzstein

    ()
    (Department of Economics, Dartmouth College, Hanover, New Hampshire 03755)

  • William J. Congdon

    ()
    (Brookings Institution, Washington, DC 20036)

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.

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Bibliographic Info

Article provided by Annual Reviews in its journal Annual Review of Economics.

Volume (Year): 4 (2012)
Issue (Month): 1 (07)
Pages: 511-540

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Handle: RePEc:anr:reveco:v:4:y:2012:p:511-540

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Related research

Keywords: behavioral economics; taxation; social insurance; externalities;

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Cited by:
  1. Thomas Piketty & Emmanuel Saez, 2012. "Optimal Labor Income Taxation," NBER Working Papers 18521, National Bureau of Economic Research, Inc.
  2. Martin Binder & Leonhard K. Lades, 2014. "Autonomy-enhancing Paternalism," Economics Working Paper Archive wp_800, Levy Economics Institute.
  3. Schnellenbach, Jan & Schubert, Christian, 2014. "Behavioral public choice: A survey," Freiburg Discussion Papers on Constitutional Economics 14/03, Walter Eucken Institut e.V..
  4. Theresa Kuchler, 2013. "Sticking to Your Plan: Hyperbolic Discounting and Credit Card Debt Paydown," Discussion Papers 12-025, Stanford Institute for Economic Policy Research.
  5. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528 - 583.

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