Can small incentives have large effects? the impact of taxes versus bonuses on disposable bag use by Tatiana A. Homonoff
By: Homonoff, Tatiana A
.
Material type: 
ArticlePublisher: 2018Subject(s): INVERSIONES | INCENTIVOS | POLITICA FISCAL | MODELOS ECONOMETRICOSOnline resources: Click here to access online
In:
American Economic Journal. Economic Policy v. 10, n. 4, November 2018, p. 177-210Summary: This paper examines a simple element of financial incentive—design whether the incentive takes the form of a fee for bad behavior or a reward for good behavior—to determine if the framing of the incentive influences the policy’s effectiveness. I investigate the effect of two similar policies aimed at reducing disposable bag use: a $0.05 tax on disposable bag use and a $
0.05 bonus for reusable bag use. While the tax decreased disposable bag use by over 40 percentage points,
the bonus generated virtually no effect on behavior. These results are consistent with a model of loss aversion.
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| OP 2135/2018/3-1 Cash-flow taxes in an international setting | OP 2135/2018/3-2 Consumer valuation of fuel costs and tax policy: | OP 2135/2018/4 American Economic Journal : Economic Policy | OP 2135/2018/4-1 Can small incentives have large effects? | OP 2135/2018/4-2 The welfare impact of second-best uniform-Pigouvian taxation | OP 2135/2018/4-3 Taxes and US oil production | OP 2135/2019/1 American Economic Journal : Economic Policy |
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This paper examines a simple element of financial incentive—design whether the incentive takes the form of a fee for bad behavior or a reward for good behavior—to determine if the framing of the incentive influences the policy’s effectiveness. I investigate the effect of two similar policies aimed at reducing disposable bag use: a $0.05 tax on disposable bag use and a $
0.05 bonus for reusable bag use. While the tax decreased disposable bag use by over 40 percentage points,
the bonus generated virtually no effect on behavior. These results are consistent with a model of loss aversion.
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