Time delay, complexity and support for taxation

Silvia Tiezzi, Erte Xiao

Research output: Contribution to journalArticleResearchpeer-review

5 Citations (Scopus)

Abstract

People often experience the benefits of taxation over time. We design an intertemporal market experiment with negative externalities to examine how delaying the benefits of taxation affects support for taxes. We find that when negative externalities occur immediately, people learn to adopt Pigouvian taxes, which are aimed at reducing negative externalities and restoring market efficiency. By contrast, when negative externalities are delayed, people are less receptive to taxation. This effect persists over time. Our data reveal that the strong negative delay effect can be explained in large part by narrow bracketing and the increased perceived complexity of the environment, rather than by time discounting per-se. We argue and demonstrate that increasing the transparency of intertemporal tradeoffs can effectively promote support for taxation.
Original languageEnglish
Pages (from-to)117-141
Number of pages25
JournalJournal of Environmental Economics and Management
Volume77
DOIs
Publication statusPublished - 1 May 2016

Keywords

  • Externalities
  • Intertemporal choice
  • Lab experiments
  • Support for taxation

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