"Behavioral economics is playing an increasingly prominent role in the formulation of policies to mitigate climate change, including discussions of how to encourage uptake of energy-saving technologies, and how to increase public concern and openness to the types of taxes and transfers that are necessary to have a significant impact on the problem (Allcott and Mullainathan, 2010). But the new analyses of individual behavior coming from behavioral economics have not yet been integrated with more traditional analyses modeling individual responses to economic incentives.
The goal of the proposed research is to conduct and estimation of consumer responses to a carbon tax – taking account of insights from behavioral economics. The research will identify how the predicted acceptability of a Green Tax Reform and predicted impacts on behavior depend on the assumptions one makes about the psychology of economic agents.
This project will bring together the insights of behavioral economics, in particular with assumptions about the psychology of economic agents, and the rigor of applied demand analysis. Behavioral economics’ theories and techniques represent one of the most powerful and innovative advances in economic research in recent years. Empirical demand analysis, pioneered by Richard Stone, Angus Deaton and John Muellbauer, is one of the most solid, sophisticated, and, from an applicative point of view, effective tools constituting the core of conventional microeconomic theory. While traditional economics and behavioral economics are sometimes seen as intellectual competitors, the two approaches are, in fact, complementary."
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