IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v20y1992i1p103-113.html
   My bibliography  Save this article

Pigouvian Taxation, Risk Aversion, and Avoidance

Author

Listed:
  • Robert E. Kohn

    (Southern Illinois University at Edwardsville)

Abstract

When there are large numbers of government projects in which benefits and costs are uncertain, strong arguments have been made for ignoring people's aversion to risk and basing public decisions entirely on expected values. However, these arguments are weakened in cases in which risk-averse citizens can make private expenditures to reduce their own risk. A model is presented in which pollution damage is stochastic and households expend resources to reduce their exposure. If pollution is controlled by a Pigouvian tax set equal to expected marginal pollution damage alone and the additional burden of uncertainty borne by risk-averse households is not taken into account, it is shown that the economy will operate inside of its production possibility frontier. The article concludes with an example in the policy arena where this issue is likely to be an important one.

Suggested Citation

  • Robert E. Kohn, 1992. "Pigouvian Taxation, Risk Aversion, and Avoidance," Public Finance Review, , vol. 20(1), pages 103-113, January.
    • Handle: RePEc:sae:pubfin:v:20:y:1992:i:1:p:103-113
    DOI: 10.1177/109114219202000107
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114219202000107
    Download Restriction: no
    File URL: https://libkey.io/10.1177/109114219202000107?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Harford, Jon D., 1984. "Averting behavior and the benefits of reduced soiling," Journal of Environmental Economics and Management, Elsevier, vol. 11(3), pages 296-302, September.
    2. Oates, Wallace E, 1983. "The Regulation of Externalities: Efficient Behavior by Sources and Victims," Public Finance = Finances publiques, , vol. 38(3), pages 362-375.
    3. Mishan, E J, 1974. "What Is the Optimal Level of Pollution?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1287-1299, Nov.-Dec..
    4. Harrington, Winston & Portney, Paul R., 1987. "Valuing the benefits of health and safety regulation," Journal of Urban Economics, Elsevier, vol. 22(1), pages 101-112, July.
    5. Richard E. Schuler, 1974. "Air Quality Improvement And Long‐Run Urban Form," Papers in Regional Science, Wiley Blackwell, vol. 32(1), pages 133-148, January.
    6. Kerry Smith, V. & Desvousges, William H., 1986. "Averting behavior: Does it exist?," Economics Letters, Elsevier, vol. 20(3), pages 291-296.
    7. repec:bla:econom:v:50:y:1983:i:200:p:425-37 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruno Lanz, 2015. "Avertive expenditures, endogenous quality perception, and the demand for public goods: An instrumental variable approach," CIES Research Paper series 36-2015, Centre for International Environmental Studies, The Graduate Institute.
    2. repec:gii:ciesrp:cies_rp_36rev is not listed on IDEAS
    3. Lanz, Bruno & Provins, Allan, 2017. "Using averting expenditures to estimate the demand for public goods: Combining objective and perceived quality," Resource and Energy Economics, Elsevier, vol. 47(C), pages 20-35.
    4. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    5. Abdalla, Charles W. & Roach, Brian A. & Epp, Donald J. & Shortle, James S., 1990. "Valuing Environmental Quality Changes Using Averting Expenditures: An Application to Groundwater Contamination," 1990 Annual meeting, August 5-8, Vancouver, Canada 271021, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Jason F. Shogren & Tommy Stamland, 2005. "Self-Protection and Value of Statistical Life Estimation," Land Economics, University of Wisconsin Press, vol. 81(1).
    7. Zhang, Junjie & Mu, Quan, 2018. "Air pollution and defensive expenditures: Evidence from particulate-filtering facemasks," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 517-536.
    8. Surender Kumar & D.N. Rao, 2001. "Valuing The Beneficts of Air Pollution Abatement Using a Health Production Function A Case Study of Panipat Thermal Power Station, India," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(2), pages 91-102, October.
    9. Marta Suárez-Varela & Ariel Dinar, 2020. "The Role of Curtailment Versus Efficiency on Spillovers Among Pro-Environmental Behaviors: Evidence from Two Towns in Granada, Spain," Sustainability, MDPI, vol. 12(3), pages 1-24, January.
    10. Alhassan, Mustapha & Gustafson, Christopher R. & Schoengold, Karina, 2017. "Effects of Information Framing on Smallholder Irrigation Farmers’ Willingness to Pay for Groundwater Protection: The Case of Vea Irrigation Scheme in Ghana," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258432, Agricultural and Applied Economics Association.
    11. Indira Devi P, 2007. "Pesticide Use in the Rice Bowl of Kerala: Health Costs and Policy Options," Working Papers id:1147, eSocialSciences.
    12. Mariano J. Rabassa & Mariana Conte Grand & Christian M. García-Witulski, 2021. "Heat warnings and avoidance behavior: evidence from a bike-sharing system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 1-28, January.
    13. Leslie Richardson & John B. Loomis & Patricia A. Champ, 2013. "Valuing Morbidity from Wildfire Smoke Exposure: A Comparison of Revealed and Stated Preference Techniques," Land Economics, University of Wisconsin Press, vol. 89(1), pages 76-100.
    14. Lohr, Luanne & Park, Timothy A. & Wetzstein, Michael E., 1998. "Voluntary Economic And Environmental Risk Tradeoffs In Crop Protection Decisions," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(01), pages 1-9, April.
    15. John C. Whitehead & Thomas J. Hoban & George Van Houtven, 1999. "Averting Behavior and Drinking Water Quality," Working Papers 9905, East Carolina University, Department of Economics.
    16. Agee, Mark D. & Crocker, Thomas D., 2002. "On Techniques to Value the Impact of Environmental Hazards on Children's Health," National Center for Environmental Economics-NCEE Working Papers 280801, United States Environmental Protection Agency (EPA).
    17. Wasantha Athukorala & Clevo Wilson & Tim Robinson, 2012. "Determinants of Health Costs due to Farmers’ Exposure to Pesticides: An Empirical Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(1), pages 158-174, February.
    18. Bukenya, James O., 2006. "Household Perceptions Of The Quality Of Drinking Water In Uganda," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35355, Southern Agricultural Economics Association.
    19. Gregory Poe & Richard Bishop, 1999. "Valuing the Incremental Benefits of Groundwater Protection when Exposure Levels are Known," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(3), pages 341-367, April.
    20. Tenwalde, Tracy & Jones, Eugene & Hitzhusen, Frederick J., 2005. "An Economic Analysis of Consumer Expenditures for Safe Drinking Water: Addressing Nitrogen Risk with an Averting Cost Approach," 2005 Annual meeting, July 24-27, Providence, RI 19431, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    21. Vassilis Markantonis & Kostas Bithas, 2010. "The application of the contingent valuation method in estimating the climate change mitigation and adaptation policies in Greece. An expert-based approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 12(5), pages 807-824, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:20:y:1992:i:1:p:103-113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.