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The role of information provision as a policy instrument to supplement environmental taxes: Empowering consumers to choose optimally

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Author Info
Eftichios S. Sartzetakis () (Department of Economics, University of Macedonia)
Anastasios Xepapadeas () (Department of International and European Economic Studies, Athens University of Economics and Business)
Emmanuel Petrakis () (Department of Economics University of Crete)

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Abstract

The present paper examines, within a dynamic framework, the use of information provision as a policy instrument to supplement environmental taxation. We assume that at least a fraction of consumers do not posses the required information to make the optimal choices, and that their behavior at each time period depends on the accumulated stock of information. We show that, as the accumulated stock of information provision increases, both the optimal level of information provided at each period of time and the optimal tax rate decline over time. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies. Information provision can sift the demand towards environmentally friendly products over time and thus, reduce the required level of the tax rate.

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Publisher Info
Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2009_02.

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Date of creation: Jan 2009
Date of revision: Jan 2009
Handle: RePEc:mcd:mcddps:2009_02

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Related research
Keywords: information provision; enviromental taxation;

Other versions of this item:

Find related papers by JEL classification:
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

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References listed on IDEAS
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  1. Emmanuel Petrakis & Eftichios Sartzetakis & Anastasios Xepapadeas, 2005. "Environmental Information Provision as a Public Policy Instrument," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), pages 1365-1365. [Downloadable!] (restricted)
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  2. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
  3. Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-50, June. [Downloadable!] (restricted)
  4. Arndt, Johan & Simon, Julian L, 1983. "Advertising and Economies of Scale: Critical Comments on the Evidence," Journal of Industrial Economics, Blackwell Publishing, vol. 32(2), pages 229-42, December. [Downloadable!] (restricted)
  5. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring. [Downloadable!] (restricted)
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  6. Kennedy, P. & Laplante, B. & Maxwell, J., 1990. "Pollution Policy: The Role of Publicly Provided Information," Papers 9021, Laval - Recherche en Energie.
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  7. Eugene Choo & Robert Clark, 2006. "The Effectiveness of Anti-Smoking Campaigns over the Life-Cycle and the Role of Information," Working Papers tecipa-263, University of Toronto, Department of Economics. [Downloadable!]
  8. Yehuda Kotowitz & Frank Mathewson, 1979. "Advertising, Consumer Information, and Product Quality," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 566-588, Autumn. [Downloadable!] (restricted)
  9. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug.. [Downloadable!] (restricted)
  10. Liston-Heyes, Catherine, 2001. "Setting the Stakes in Environmental Contests," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 1-12, January. [Downloadable!] (restricted)
  11. Jean-Pierre Dubé & Günter Hitsch & Puneet Manchanda, 2005. "An Empirical Model of Advertising Dynamics," Quantitative Marketing and Economics, Springer, vol. 3(2), pages 107-144, June. [Downloadable!] (restricted)
  12. Pim Heijnen & Lambert Schoonbeek, 2008. "Environmental groups in monopolistic markets," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(4), pages 379-396, April. [Downloadable!] (restricted)
  13. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring. [Downloadable!] (restricted)
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