Peer Effects in Public Support for Pigouvian Taxation

52 Pages Posted: 19 Dec 2018 Last revised: 19 Apr 2021

See all articles by Lingbo Huang

Lingbo Huang

Nanjing Audit University

Erte Xiao

Monash University

Date Written: April 10, 2021

Abstract

Despite the efficacy of Pigouvian taxes, governments often find them surprisingly controversial to implement. Evidence suggests the reason may be their complexity, which stems from the delay of externality. This paper studies whether communication among peers can promote public support for Pigouvian taxation. Using a market experiment with time-delayed negative externalities, we find that support for Pigouvian taxation increases when tax supporters can explain their position to other voters. We show that the peer effects cannot be explained by simple imitation or compliance, but are more likely to be driven by social learning. Our findings provide converging evidence for the role of complexity in the lack of support for Pigouvian taxes. These results point to the importance of giving voice and visibility to members of the general public who support efficient but complex tax policies.

Keywords: Market Experiment, Pigouvian Taxation, Negative Externality, Peer Effects,Vote

JEL Classification: D03, D62, D72, H23

Suggested Citation

Huang, Lingbo and Xiao, Erte, Peer Effects in Public Support for Pigouvian Taxation (April 10, 2021). Available at SSRN: https://ssrn.com/abstract=3294461 or http://dx.doi.org/10.2139/ssrn.3294461

Lingbo Huang

Nanjing Audit University ( email )

86 Yushan W Rd
Pukou, Jiangsu 210017
China

Erte Xiao (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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