Search results for " pigouvian taxes"

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Interventions with Sticky Social Norms: A Critique

2021

Abstract We study the consequences of policy interventions when social norms are endogenous but costly to change. In our environment, a group faces a negative externality that it partially mitigates through incentives in the form of punishments. In this setting, policy interventions can have unexpected consequences. The most striking is that when the cost of bargaining is high, introducing a Pigouvian tax can increase output—yet in doing so increase welfare. An observer who saw that an increase in a Pigouvian tax raised output might wrongly conclude that this harmed welfare and that a larger tax increase would also raise output. This counter-intuitive impact on output is demonstrated theore…

0502 economics and business05 social sciencesPsychological interventionEconomics050206 economic theory050207 economicssocial mechanisms pigouvian taxes adjustment costsGeneral Economics Econometrics and FinanceSocial psychologyJournal of the European Economic Association
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Failing to Provide Public Goods: Why the Afghan Army Did Not Fight

2022

The theory of public goods is mainly about the difficulty in paying for them. Our question here is this: Why might public goods not be provided, even if funding is available? We use the Afghan Army as our case study. We explore this issue using a simple model of a public good that can be provided through collective action and peer pressure, by modeling the self-organization of a group (the Afghan Army) as a mechanism design problem. We consider two kinds of transfer subsidies from an external entity such as the U.S. government. One is a Pigouvian subsidy that simply pays the salaries, rewarding individuals who provide effort. The second is an output/resource multiplier (the provision of mil…

social mechanisms pigouvian taxes adjustment costs national defence
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