Judging Nudging: Understanding the Welfare Results of Nudges Versus Taxes
Whereas behavioral non-price interventions (“nudges”) have grown from tutorial curiosity to a bona fide coverage device, their relative financial effectivity stays under-researched. We develop a unified framework to estimate welfare results of each nudges and taxes. We showcase our method by making a database of greater than 300 fastidiously hand-coded level estimates of non-price and value interventions within the markets for cigarettes, influenza vaccinations, and family power.
Whereas nudges are efficient in altering habits in all three markets, they don’t seem to be essentially essentially the most environment friendly coverage. We discover that nudges are extra environment friendly out there for cigarettes, whereas taxes are extra environment friendly within the power market. For influenza vaccinations, optimum subsidies possible outperform nudges. Importantly, two key components govern the distinction in outcomes throughout markets: i) an elasticity-weighted customary deviation of the behavioral bias, and ii) the magnitude of the common externality. Nudges dominate taxes each time i) exceeds ii). Combining nudges and taxes doesn’t all the time present quantitatively important enhancements to implementing one coverage device alone.
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