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Why Do Environmental Taxes Work Better in Developed Countries?

Author

Listed:
  • Coria, Jessica

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Villegas-Palacio, Clara

    (Facultad de Minas, Universidad Nacional de Colombia - Sede Medellin)

  • Cárdenas, J.C.

    (Dept of Economics, Universidad de los Andes, Colombia)

Abstract

We compare of the performance of emission taxes between Colombia and Sweden in an experimental setting where subjects are regulated through environmental taxes and had to decide on emission levels, compliance behavior, and adoption of an environmentally friendly technology. Our design allows us to analyze the role of variations in the stringency of the policy enforcement by regulatory agencies in two different cultural contexts. In line with previous literature that emphasizes the role of social norms and intrinsic motivations explaining compliance behavior, we find that actual emissions and tax underreporting are lower than predicted by traditional models that are solely based on self-interested preferences. However, we find that for an equivalent monitoring stringency, there are no statistically significant differences in emission levels and compliance behavior between Colombian and Swedish subjects. This is to say that despite the positive effect of social norms enhancing compliance, a more stringent enforcement remains as an important mechanism to induce firms to comply with the regulation.

Suggested Citation

  • Coria, Jessica & Villegas-Palacio, Clara & Cárdenas, J.C., 2012. "Why Do Environmental Taxes Work Better in Developed Countries?," Working Papers in Economics 521, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0521
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    References listed on IDEAS

    as
    1. Clara Villegas-Palacio & Jessica Coria, 2010. "On the interaction between imperfect compliance and technology adoption: taxes versus tradable emissions permits," Journal of Regulatory Economics, Springer, vol. 38(3), pages 274-291, December.
    2. Wang, Hua & Wheeler, David, 2005. "Financial incentives and endogenous enforcement in China's pollution levy system," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 174-196, January.
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    5. Rodriguez-Sickert, Carlos & Guzmán, Ricardo Andrés & Cárdenas, Juan Camilo, 2008. "Institutions influence preferences: Evidence from a common pool resource experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 215-227, July.
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    9. Coria, Jessica & Sterner, Thomas, 2008. "Tradable Permits in Developing Countries: Evidence from air pollution in Santiago, Chile," Working Papers in Economics 326, University of Gothenburg, Department of Economics.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why Do Environmental Taxes Work Better in Developed Countries?
      by Maximo Rossi in Wikiprogress América Latina on 2012-01-23 00:42:00

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    More about this item

    Keywords

    laboratory experiments; emission taxes; imperfect monitoring; technology adoption; developing countries; cross-country comparison; Colombia; Sweden.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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