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Wednesday, Might 31, 2023
The Welfare Results Of Nudges Versus Taxes
John A. Record (Chicago; Google Scholar), Matthias Rodemeier (Bocconi; Google Scholar), Sutanuka Roy (Australian Nationwide; Google Scholar) & Gregory Solar (Chicago), Judging Nudging: Understanding the Welfare Results of Nudges Versus Taxes:
Whereas behavioral non-price interventions (“nudges”) have grown from tutorial curiosity to a bona fide coverage instrument, their relative financial effectivity stays under-researched. We develop a unified framework to estimate welfare results of each nudges and taxes. We showcase our strategy by making a database of greater than 300 fastidiously hand-coded level estimates of nonprice and worth interventions within the markets for cigarettes, influenza vaccinations, and family power. Whereas nudges are efficient in altering habits in all three markets, they don’t seem to be essentially probably the most environment friendly coverage.
We discover that nudges are extra environment friendly out there for cigarettes, whereas taxes are extra environment friendly within the power market. For influenza vaccinations, optimum subsidies probably outperform nudges. Importantly, two key components govern the distinction in outcomes throughout markets: i) an elasticity-weighted normal deviation of the behavioral bias, and ii) the magnitude of the typical externality. Nudges dominate taxes every time i) exceeds ii). Combining nudges and taxes doesn’t all the time present quantitatively important enhancements to implementing one coverage instrument alone.
https://taxprof.typepad.com/taxprof_blog/2023/05/the-welfare-effects-of-nudges-versus-taxes.html
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