Gradual Policy Reforms

We investigate, using an online experiment, whether a gradual policy reform can increase support for CO2 taxes compared to a one-step reform. Under a gradual reform, voters first decide on implementing an intermediate tax, followed by a second decision between maintaining the intermediate tax or adopting a higher tax. We hypothesize that the gradual reform may increase voter support by shifting norms and correcting misperceptions; but it has the disadvantage that the benefits of a high tax, relative to an intermediate tax, can appear (too) small. Our empirical findings reveal that the gradual reform backfires: fewer voters support a high CO2 tax under the gradual reform than under the one-step reform. This effect appears to stem from voter satisfaction with the intermediate tax and adverse responses to subsequent reform steps. Further, positive perceptions that arise from experiencing an intermediate tax do not spillover to perceptions about the high tax. Information provision partially alleviates backfiring of the gradual reform.