Can small incentives have large effects? The impact of taxes versus bonuses on disposable bag use

Tatiana A. Homonoff

doi:10.1257/pol.20150261

Can small incentives have large effects? The impact of taxes versus bonuses on disposable bag use

Research output: Contribution to journal › Article › peer-review

Abstract

This paper examines a simple element of financial incentive-design whether the incentive takes the form of a fee for bad behavior or a reward for good behavior-to determine if the framing of the incentive influences the policy's effectiveness. I investigate the effect of two similar policies aimed at reducing disposable bag use: a $ 0.05 tax on disposable bag use and a $ 0.05 bonus for reusable bag use. While the tax decreased disposable bag use by over 40 percentage points, the bonus generated virtually no effect on behavior. These results are consistent with a model of loss aversion.

Original language	English (US)
Pages (from-to)	177-210
Number of pages	34
Journal	American Economic Journal: Economic Policy
Volume	10
Issue number	4
DOIs	https://doi.org/10.1257/pol.20150261
State	Published - Nov 1 2018

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

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Can small incentives have large effects? The impact of taxes versus bonuses on disposable bag use

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