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The behavioural effect of Pigovian regulation: Evidence from a field experiment

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  • Bruno Lanz
  • Jules-Daniel Wurlod
  • Luca Panzone
  • Timo Swanson

Abstract

Monetary incentives associated with Pigovian regulation may crowd-out intrinsic motivation to mitigate an externality. We quantify this behavioral effect using data from an experiment with real product choices together with a structural model of consumer behavior. First we show that information about products' embodied carbon induces a voluntary shift to cleaner products, and we estimate that intrinsic motivation is equivalent to a change in relative prices of GBP25-167/tCO2. Second, the impact of a Pigovian intervention in proportion to embodied carbon (GBP19/tCO2) suggests significant motivation crowding, and compensating this behavioral bias would require increasing the Pigovian price signal by GBP0.60-170/tCO2. Finally, based on a cross-product comparison, we find that motivation crowding declines with the cost (or effort) of provision. This suggests that, on account of motivation crowding, environmental taxes ought to be set higher for products with price elastic demand.

Suggested Citation

  • Bruno Lanz & Jules-Daniel Wurlod & Luca Panzone & Timo Swanson, 2015. "The behavioural effect of Pigovian regulation: Evidence from a field experiment," CIES Research Paper series 32-2014, Centre for International Environmental Studies, The Graduate Institute.
  • Handle: RePEc:gii:ciesrp:cies_rp_32
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    Cited by:

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    2. Linus Mattauch & Cameron Hepburn & Nicholas Stern, 2018. "Pigou Pushes Preferences: Decarbonisation and Endogenous Values," CESifo Working Paper Series 7404, CESifo.
    3. Maïmouna Yokessa & Stéphan Marette, 2019. "A Tax Coming from the IPCC Carbon Prices Cannot Change Consumption: Evidence from an Experiment," Sustainability, MDPI, Open Access Journal, vol. 11(18), pages 1-20, September.
    4. Stiglitz, Joseph E., 2019. "Addressing climate change through price and non-price interventions," European Economic Review, Elsevier, vol. 119(C), pages 594-612.
    5. Lang, Ghislaine & Lanz, Bruno, 2021. "Energy efficiency, information, and the acceptability of rent increases: A survey experiment with tenants," Energy Economics, Elsevier, vol. 95(C).
    6. Bazoche, Pascale & Guinet, Nicolas & Poret, Sylvaine & Teyssier, Sabrina, 2021. "Does the provision of information increase the substitution of animal proteins with plant-based proteins? An experimental investigation into consumer choices," Working Papers 313663, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    7. Pascale Bazoche & Nicolas Guinet & Sylvaine Poret & Sabrina Teyssier, 2021. "Does the provision of information increase the substitution of animal proteins with plant-based proteins? An experimental investigation into consumer choices [L’apport d’informations augmente-t-il ," Working Papers hal-03350356, HAL.
    8. Houde, Sebastien & Aldy, Joseph E., 2017. "The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies," Working Paper Series rwp17-047, Harvard University, John F. Kennedy School of Government.

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    More about this item

    Keywords

    Motivation crowding; Pigovian regulation; Information; Behavioral agents; Field experiments; Policy instruments.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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