The role of information provision as a policy instrument to supplement environmental taxes: Empowering consumers to choose optimally
AbstractThis paper examines, within a dynamic framework, the role of information provision as a policy instrument to supplement environmental taxation. Several products are responsible for long term health problems as well as environmental damages. Many consumers do not possess the required information to optimally substitute away from these products. However, as the stock of information regarding the negative effects of these products builds up, an increasing fraction of consumers behaves optimally. The government uses two policy instruments, environmental taxation and information provision. We show that as the accumulated stock of information increases, the optimal tax rate declines over time. Information provision can shift market demand towards environmentally friendly goods over time, and thus reduce the required level of the tax rate. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies.
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Bibliographic InfoPaper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1012.
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- Eftichios S. Sartzetakis & Anastasios Xepapadeas & Emmanuel Petrakis, 2009. "The role of information provision as a policy instrument to supplement environmental taxes: Empowering consumers to choose optimally," Discussion Paper Series 2009_02, Department of Economics, University of Macedonia, revised Jan 2009.
- Eftichios S. Sartzetakis & Anastasios Xepapadeas & Emmanuel Petrakis, 2009. "The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes: Empowering Consumers to Choose Optimally," Working Papers 2009.46, Fondazione Eni Enrico Mattei.
- Sartzetakis, Eftichis & Xepapadeas, Anastasios & Petrakis, Emmanuel, 2008. "The role of information provision as a policy instrument to supplement environmental taxes: Empowering consumers to choose optimally," MPRA Paper 12083, University Library of Munich, Germany.
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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