Details

Autor(en) / Beteiligte

• Alesina, Alberto
• Passarelli, Francesco

Titel

Regulation versus taxation

Ist Teil von

• Journal of public economics, 2014-02, Vol.110, p.147-156

Ort / Verlag

Elsevier B.V

Erscheinungsjahr

2014

Quelle

Alma/SFX Local Collection

Beschreibungen/Notizen

• We study which policy tool and at what level a majority chooses in order to reduce activities with negative externalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels which are too restrictive when the activity is performed mainly by a small fraction of the population, and when costs for reducing activities or paying taxes are sufficiently convex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax. •We study the political economy of curbing negative externalities.•Rules or taxes are too stringent when the externality is due to a minority.•More often regulation is too restrictive compared to taxation.•If a tax is optimal but the majority prefers a rule, the latter is too harsh.