We study which policy tool and at what level a majority chooses in order to reduce activities with negativeexternalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces thenegative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it.For all instruments the majority chooses levels which are too restrictive when the activity is performed mainlyby a small fraction of the population, and when costs for reducing activities or paying taxes are sufficientlyconvex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.[...]

Regulation Versus Taxation

PASSARELLI, Francesco
2014

Abstract

We study which policy tool and at what level a majority chooses in order to reduce activities with negativeexternalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces thenegative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it.For all instruments the majority chooses levels which are too restrictive when the activity is performed mainlyby a small fraction of the population, and when costs for reducing activities or paying taxes are sufficientlyconvex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.[...]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11575/8469
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