The Role of Experiments for Policy Design

Forthcoming in the “Handbook of Research Methods and Applications in Experimental Economics” edited by Arthur Schram and Aljaž Ule, 2019, Edward Elgar Publishing Ltd. The material cannot be used for any other purpose without further permission.

38 Pages Posted: 8 Aug 2018

See all articles by Peter Werner

Peter Werner

Maastricht University - Department of Economics

Arno Riedl

Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 20, 2018

Abstract

In this paper, we review selected evidence to demonstrate the value of experiments for policy design with a focus on environmental policy and tax policy. Experiments can substantially improve ex-ante predictions about the outcomes of policy interventions, for example, by serving as “testbeds” to compare alternative market rules and mechanisms under tightly controlled conditions. Experiments also yield important insights into systematic deviations from strict rationality and into the heterogeneity of preferences among decision-makers that can form the basis for the (re-) design of policies. Besides describing various experimental approaches applied in the areas of environmental policy and tax policy, we also discuss further directions for successful collaborations between experimental economists and political decision-makers.

Keywords: Experiments, policy design, policy evaluation, behavioral regularities, non-standard preferences, environmental policy, tax policy

JEL Classification: C90, D03, D04, D40, H20, H26, Q58

Suggested Citation

Werner, Peter and Riedl, Arno M., The Role of Experiments for Policy Design (July 20, 2018). Forthcoming in the “Handbook of Research Methods and Applications in Experimental Economics” edited by Arthur Schram and Aljaž Ule, 2019, Edward Elgar Publishing Ltd. The material cannot be used for any other purpose without further permission.. Available at SSRN: https://ssrn.com/abstract=3217056

Peter Werner (Contact Author)

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Arno M. Riedl

Maastricht University ( email )

Department of Economics (AE1)
P.O. Box 616
Maastricht, 6200 MD
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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