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

Research output: Contribution to journalArticle

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 languageEnglish (US)
Pages (from-to)177-210
Number of pages34
JournalAmerican Economic Journal: Economic Policy
Volume10
Issue number4
DOIs
StatePublished - Nov 1 2018

Fingerprint

Tax
Bonuses
Incentives
Bonus
Policy effectiveness
Loss aversion
Financial incentives
Fees
Reward

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

@article{fb3b1a82910f4df09396ae2cf8639af5,
title = "Can small incentives have large effects? The impact of taxes versus bonuses on disposable bag use",
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.",
author = "Tatiana Homonoff",
year = "2018",
month = "11",
day = "1",
doi = "10.1257/pol.20150261",
language = "English (US)",
volume = "10",
pages = "177--210",
journal = "American Economic Journal: Economic Policy",
issn = "1945-7731",
publisher = "American Economic Association",
number = "4",

}

TY - JOUR

T1 - Can small incentives have large effects? The impact of taxes versus bonuses on disposable bag use

AU - Homonoff, Tatiana

PY - 2018/11/1

Y1 - 2018/11/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=85057734951&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85057734951&partnerID=8YFLogxK

U2 - 10.1257/pol.20150261

DO - 10.1257/pol.20150261

M3 - Article

VL - 10

SP - 177

EP - 210

JO - American Economic Journal: Economic Policy

JF - American Economic Journal: Economic Policy

SN - 1945-7731

IS - 4

ER -