Can Small Incentives Have Large Effects? The Impact of Taxes versus Bonuses on Disposable Bag Use

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 $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. (JEL D12, D91, H23)

• Publication year

  2018

• Venue

  American Economic Journal: Economic Policy

• Publication date

  2018-11-01

• Fields of study

  Economics

• Identifiers
  DOI 10.1257/POL.20150261
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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