Time delay,complexity and support for taxation |
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| Institution: | 1. Department of Economics and Statistics, University of Siena (I), Italy;2. Department of Economics, Monash University, Australia;1. Paris School of Economics and Centre National de la Recherche Scientifique, France;2. Paris School of Economics and University of Paris 1 Panthéon-Sorbonne, France;1. Chair for Integrative Risk Management and Economics, ETH Zürich, Zürichbergstrasse 18, 8092 Zürich, Switzerland;2. Department of International Economics and Center for International Environmental Studies, Graduate Institute of International and Development Studies, Switzerland;3. Paris School of Economics – CNRS, France |
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| 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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| Keywords: | Lab experiments Externalities Support for taxation Intertemporal choice |
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