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Time delay, complexity and support for taxation

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  • Tiezzi, Silvia
  • Xiao, Erte

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.

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  • Tiezzi, Silvia & Xiao, Erte, 2016. "Time delay, complexity and support for taxation," Journal of Environmental Economics and Management, Elsevier, vol. 77(C), pages 117-141.
    • Handle: RePEc:eee:jeeman:v:77:y:2016:i:c:p:117-141
    DOI: 10.1016/j.jeem.2016.03.002
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    2. Huang, Lingbo & Xiao, Erte, 2021. "Peer effects in public support for Pigouvian taxation," Journal of Economic Behavior & Organization, Elsevier, vol. 187(C), pages 192-204.
    3. Thiago Fonseca Morello & Luís Fernando Silva e Silva, 2023. "Garnering support for Pigouvian taxation with tax return: a lab experiment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(2), pages 115-142, April.
    4. Marion Dupoux & Benjamin Ouvrard, 2023. "Harnessing social information to improve public support for Pigouvian taxes," Working Papers 2024-05, Grenoble Applied Economics Laboratory (GAEL).
    5. Andrea Baranzini & Nicolas Borzykowski & Stefano Carattini, 2016. "Carbon offsets out of the woods? The acceptability of domestic vs. international reforestation programmes," GRI Working Papers 257, Grantham Research Institute on Climate Change and the Environment.
    6. Cruz Rambaud, Salvador & Ortiz Fernández, Piedad & Parra Oller, Isabel María, 2023. "A systematic review of the main anomalies in intertemporal choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).
    7. Huang, Lingbo & Tiezzi, Silvia & Xiao, Erte, 2022. "Tax liability side equivalence and time delayed externalities," European Journal of Political Economy, Elsevier, vol. 72(C).
    8. Stefano Carattini & Maria Carvalho & Sam Fankhauser, 2018. "Overcoming public resistance to carbon taxes," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 9(5), September.
    9. Silvi, Mariateresa & Padilla Rosa, Emilio, 2023. "A tragedy of the horizons? An intertemporal perspective on public support for carbon taxes," Energy Economics, Elsevier, vol. 125(C).
    10. Cherry, Todd L. & Kallbekken, Steffen & Kroll, Stephan, 2017. "Accepting market failure: Cultural worldviews and the opposition to corrective environmental policies," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 193-204.
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    More about this item

    Keywords

    Lab experiments; Externalities; Support for taxation; Intertemporal choice;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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