The role of information provision as a policy instrument to supplement environmental taxes: Empowering consumers to choose optimally
This paper examines, within a dynamic framework, the role of information provision as a policy instrument to supplement environmental taxation. Several products are responsible for long term health problems as well as environmental damages. Many consumers do not possess the required information to optimally substitute away from these products. However, as the stock of information regarding the negative effects of these products builds up, an increasing fraction of consumers behaves optimally. The government uses two policy instruments, environmental taxation and information provision. We show that as the accumulated stock of information increases, the optimal tax rate declines over time. Information provision can shift market demand towards environmentally friendly goods over time, and thus reduce the required level of the tax rate. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies.
|Date of creation:|
|Contact details of provider:|| Postal: 76, Patission Street, Athens 104 34|
Phone: (+301) 8214021
Fax: (301) 8214021
Web page: http://deos.aueb.gr/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kennedy, P. & Laplante, B. & Maxwell, J., 1990.
"Pollution Policy: The Role of Publicly Provided Information,"
9021, Laval - Recherche en Energie.
- Kennedy, P.W. & Laplante, B. & Maxwell, J., 1993. "Pollution Policy: The Role for Publicly Provided Information," Papers 9301, Laval - Recherche en Energie.
- Fred M. Feinberg, 2001. "On Continuous-Time Optimal Advertising Under S-Shaped Response," Management Science, INFORMS, vol. 47(11), pages 1476-1487, November.
- Jean-Pierre Dubé & Günter Hitsch & Puneet Manchanda, 2005. "An Empirical Model of Advertising Dynamics," Quantitative Marketing and Economics (QME), Springer, vol. 3(2), pages 107-144, June.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
- 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.
- Dixit, Avinash K., 1978. "A Model of Duopoly Suggesting a Theory of Entry Barriers," The Warwick Economics Research Paper Series (TWERPS) 125, University of Warwick, Department of Economics.
- 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.
- Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-450, June.
- Petrakis Emmanuel & Sartzetakis Eftichios Sophocles & Xepapadeas Anastasios, 2005.
"Environmental Information Provision as a Public Policy Instrument,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 4(1), pages 1-33, November.
- Emmanuel Petrakis & Eftichios S. Sartzetakis & Anastasios Xepapadeas, 2004. "Environmental Information Provision as a Public Policy Instrument," Working Papers 0414, University of Crete, Department of Economics.
- Arndt, Johan & Simon, Julian L, 1983. "Advertising and Economies of Scale: Critical Comments on the Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 32(2), pages 229-242, December.
- Heyes, Anthony G. & Maxwell, John W., 2004.
"Private vs. public regulation: political economy of the international environment,"
Journal of Environmental Economics and Management,
Elsevier, vol. 48(2), pages 978-996, September.
- Anthony Heyes and John Maxwell, 2003. "Private vs. Public Regulation: Political Economy of the International Environment," Royal Holloway, University of London: Discussion Papers in Economics 03/5, Department of Economics, Royal Holloway University of London, revised Dec 2003.
- Kennedy Peter W. & Laplante Benoit & Maxwell John, 1994. "Pollution Policy: the Role for Publicly Provided Information," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 31-43, January.
- Pim Heijnen & Lambert Schoonbeek, 2008. "Environmental groups in monopolistic markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(4), pages 379-396, April.
- Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 63-81.
- Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
- Liston-Heyes, Catherine, 2001. "Setting the Stakes in Environmental Contests," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 1-12, January.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:aue:wpaper:1012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekaterini Glynou)
If references are entirely missing, you can add them using this form.