The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies
CER-ETH – Center of Economic Research at ETH Zurich Working Paper 17/282
64 Pages Posted: 8 Dec 2017
There are 3 versions of this paper
The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies
The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies
Hopf Bifurcation Analysis of Stability of an InfecTious Disease Model with Delay
Date Written: December 1, 2017
Abstract
The behavioral responses to taxes and subsidies are often subject to various behavioral biases and transaction costs — what we define as “microfrictions.” We develop a theoretical framework to show how these microfrictions — and their heterogeneity across the population and policy instruments — affect the design of Pigouvian policies. Standard Pigouvian pricing still holds with transaction costs, but requires adjustment with behavioral biases. We use transaction-level data from the US appliance market to estimate the heterogeneous behavioral responses to an array of energy fiscal policies and to quantify microfrictions. We then assess optimal fiscal policies and find that it is rarely optimal to couple a Pigouvian tax on energy with an investment subsidy in this context. We also find that energy labels — intended to increase the salience of energy information — can interact in perverse ways with both taxes and subsidies.
Keywords: Energy Fiscal Policies, Behavioral Taxation, Demand Estimation, Durables
JEL Classification: Q4, Q48, Q58, H31
Suggested Citation: Suggested Citation