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Tax or green nudge? An experimental analysis of pesticide policies in Germany
[A psychological study of the inverse relationship between perceived risk and perceived benefit]

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  • Matthias Buchholz
  • Oliver Musshoff

Abstract

We use a business management game to investigate how a pesticide tax and a green nudge affect crop, tillage and pesticide decisions for a virtual farm. Results from German farmers reveal that both policies can reduce pesticide applications. The pesticide tax involves a substantial profit loss. Unlike in the green nudge scenario, participants under pesticide tax adjust their cropping and tillage strategies. We compare farmers’ decisions to those made by a mathematical programming model. Assuming profit maximisation would overestimate farmers’ response to the tax and underestimate the effectiveness of the nudge.

Suggested Citation

  • Matthias Buchholz & Oliver Musshoff, 2021. "Tax or green nudge? An experimental analysis of pesticide policies in Germany [A psychological study of the inverse relationship between perceived risk and perceived benefit]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 940-982.
    • Handle: RePEc:oup:erevae:v:48:y:2021:i:4:p:940-982.
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    File URL: http://hdl.handle.net/10.1093/erae/jbab019
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