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Guns, Latrines, and Land Reform: Dynamic Pigouvian Taxation

Author

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  • Michael Kremer
  • Jack Willis

Abstract

Dynamically and statically optimal Pigouvian subsidies and taxes on durables will differ in a growing economy. In a dynamic game, consumers may delay purchasing durables with positive externalities, such as latrines, anticipating greater future subsidies. Governments can most cheaply induce optimal purchasing by commiting to make subsidies temporary. Foreign donors may make commitment impossible, generating delays in private investment that more than fully offset the social benefits of transfers. Anticipated future taxes or regulation of durables with negative externalities, such as guns, may encourage current purchase, potentially causing policymakers who would otherwise prefer taxes or regulation to abandon such policies.

Suggested Citation

  • Michael Kremer & Jack Willis, 2016. "Guns, Latrines, and Land Reform: Dynamic Pigouvian Taxation," American Economic Review, American Economic Association, vol. 106(5), pages 83-88, May.
    • Handle: RePEc:aea:aecrev:v:106:y:2016:i:5:p:83-88
    Note: DOI: 10.1257/aer.p20161096
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    Citations

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    Cited by:

    1. Meriggi, Niccolò F. & Bulte, Erwin & Mobarak, Ahmed Mushfiq, 2021. "Subsidies for technology adoption: Experimental evidence from rural Cameroon," Journal of Development Economics, Elsevier, vol. 153(C).
    2. Brenneis, Karina & Irawan, Bambang & Wollni, Meike, 2023. "Promoting agricultural technologies with positive environmental effects: Evidence on tree planting in Indonesia," Ecological Economics, Elsevier, vol. 204(PB).
    3. Bruno De Borger & Amihai Glazer & Stef Proost, 2021. "Rational Drivers and the Choice Between Congestion Tolls and Tradeable Permits: A Political Economy Model," CESifo Working Paper Series 8821, CESifo.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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