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Regulation of morally responsible agents with motivation crowding

  • Joachim Fuenfgelt

    ()

    (Sustainability Economics Group, Leuphana University of Lueneburg, Germany)

  • Stefan Baumgaertner

    ()

    (Department of Sustainability Sciences and Department of Economics, Leuphana University of Lueneburg, Germany)

We study the regulation of a morally responsible agent in the context of a negative consumption externality and motivation crowding. In particular, we analyze how various governmental interventions affect the agent’s motivation to assume moral responsibility. Employing a motivation-crowding model, we find that morally motivated behavior will, in general, not ensure Pareto efficiency without intervention. A Pigouvian tax may be efficient under motivation crowding. But the efficient taxe rate needs to be higher, which may lead to a full crowding-out of moral motivation. By contrast, an inefficiently low taxe rate may increase the market failure due to motivation crowding. Provision of information is efficient only in very specific cases but may be effective in reducing the extent of market failure. A complementary tax-and-information policy approach is superior to a tax as single instrument if its aim is to reduce consumption and if provision of information raises moral motivation.

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Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 241.

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Length: 34 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:lue:wpaper:241
Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

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