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Discriminatory tax and subsidy on environmental behaviors

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  • Yoshinori Wada

    (Doshisha University)

Abstract

This paper investigates the consumption tax and subsidy as an environmental policy instrument for environmentally aware consumers by applying the model of price discrimination. We discover that a higher rate of subsidy should be set for less eco-friendly consumers for the purpose of achieving socially optimal environmental qualities under positive externalities and this retrogressive subsidization differs from the current progressive subsidization in the Japanese automobile industry, and could alleviate crowding out effects on prosocial behavior. Moreover, it is revealed that the optimal policy instrument for eco-friendlier consumers shifts from a subsidy to a tax, as the level of negative externalities increases.

Suggested Citation

  • Yoshinori Wada, 2019. "Discriminatory tax and subsidy on environmental behaviors," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(1), pages 25-36, January.
    • Handle: RePEc:spr:envpol:v:21:y:2019:i:1:d:10.1007_s10018-018-0220-2
    DOI: 10.1007/s10018-018-0220-2
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    Cited by:

    1. Thiago Fonseca Morello & Luís Fernando Silva e Silva, 2023. "Garnering support for Pigouvian taxation with tax return: a lab experiment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(2), pages 115-142, April.

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    More about this item

    Keywords

    Externalities; Environmental awareness; Incentives; Price discrimination; Pigouvian tax/subsidy;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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