Peer effects in public support for Pigouvian taxation

Lingbo Huang, Erte Xiao

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Despite the efficacy of Pigouvian taxes, governments often find them surprisingly controversial to implement. Evidence suggests the reason may be their complexity, which stems from the delay of externality. This paper studies whether communication among peers can promote public support for Pigouvian taxation. Using a market experiment with time-delayed negative externalities, we find that support for Pigouvian taxation increases when tax supporters can explain their position to other voters. We show that the peer effects cannot be explained by simple imitation or compliance, but are more likely to be driven by social learning. Our findings provide converging evidence for the role of complexity in the lack of support for Pigouvian taxes. These results point to the importance of giving voice and visibility to members of the general public who support efficient but complex tax policies.

Original languageEnglish
Pages (from-to)192-204
Number of pages13
JournalJournal of Economic Behavior and Organization
Volume187
DOIs
Publication statusPublished - Jul 2021

Keywords

  • Market experiment
  • Negative externality
  • Peer effects
  • Pigouvian taxation
  • Vote

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