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Do you not like Pigou, or do you not understand him? Tax aversion and revenue recycling in the lab

  • Kallbekken, Steffen
  • Kroll, Stephan
  • Cherry, Todd L.

Tax-aversion reduces the likelihood that price rationing can be a politically viable tool for environmental protection. We examine the case of the classic Pigouvian tax to control a negative externality, and consider how recycling the revenues, labeling of the tax and information about its purpose affects the support for taxation. We test the support for taxation within a single-price market experiment, in which purchases by some buyers impose external costs on others. Observing behavior consistent with tax-aversion, we also find that recycling the revenues to more narrowly targeted groups seems to increase support for taxation. In the absence of narrow revenue recycling, labeling a Pigouvian instrument as a 'tax' may significantly lower the likelihood of voter support.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 62 (2011)
Issue (Month): 1 (July)
Pages: 53-64

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Handle: RePEc:eee:jeeman:v:62:y:2011:i:1:p:53-64
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