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Title: The Role of Information Provision as a Policy Instrument to Supplement Environmental Taxes
Authors: Sartzetakis, Eftichios S.
Xepapadeas, Anastasios
Petrakis, Emmanuel
Subjects: FRASCATI::Social sciences
Keywords: Information provision
Environmental taxation
Issue Date: 2012
Source: Environmental and Resource Economics
Volume: 52
Issue: 3
First Page: 347
Last Page: 368
Abstract: This paper examines, within a dynamic framework, the role of information provision as a policy instrument to supplement environmental taxation. Several products are responsible for health as well as environmental damages. Many consumers do not possess the required information to optimally substitute away from these products. However, as the stock of information regarding the negative effects of these products builds up, an increasing fraction of consumers behaves optimally. The government uses two policy instruments, environmental taxation and information provision. We show that as the accumulated stock of information increases, the optimal tax rate declines over time. Information provision can shift market demand towards environmentally friendly goods over time, and thus reduce the required level of the tax rate. Our results provide strong evidence in support of information campaigns as a policy instrument to supplement traditional environmental policies.
ISSN: 0924-6460
Other Identifiers: 10.1007/s10640-011-9532-4
Appears in Collections:Department of Economics

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