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From the Price to the Crowding Effect

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  • Bruno S. Frey

Abstract

Crowding-Theory introduces a new psychological effect into economics. Under identifiable conditions, a higher price or stricter regulation reduces the intrinsic motivation to perform a task. Crowding-Out is the only effect which systematically works in the opposite direction to the Relative Price Effect. Crowding-Out Theory is empirically applied to two issues in Switzerland: (1) The support for siting a nuclear waste repository strongly fell when the population was offered a compensation for hosting it. (2) The possibility of direct participation in politics via referenda tends to raise civic virtue, and (ceteris paribus) tax compliance (Crowding-In Effect).

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Bibliographic Info

Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 133 (1997)
Issue (Month): II (June)
Pages: 325-350

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Handle: RePEc:ses:arsjes:1997-ii-12

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Cited by:
  1. Neunzig, Alexander R., 2002. "Effiziente Fixlöhne, Arbeitsfreude und Crowding-Effekte," CSLE Discussion Paper Series 2002-03, Saarland University, CSLE - Center for the Study of Law and Economics.
  2. Guth, Werner, 2000. "Boundedly rational decision emergence - a general perspective and some selective illustrations," Journal of Economic Psychology, Elsevier, vol. 21(4), pages 433-458, August.
  3. Werner Güth, 2000. "Boundedly Rational Decision Emergence - A General Perspective and Some Selective Illustrations," CESifo Working Paper Series 330, CESifo Group Munich.

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